OCR Level 3 Cambridge Technicals in Business Lesson Element Unit 4: Business Accounting Cash Flow Forecast

Cash Flow Forecast The cash flow records money flowing in and out of the business. Income is recorded on the date the money was received Expenditure is recorded on the date the payment was made

Definitions Income - money that has come into the business and includes: Initial capital (money) to start the business Money received from sale of products or services offered Money received from loans Money received from the sale of fixed assets

Definitions Expenditure – any money that is spent during the normal activities of the business. It can include: Payment for expenses, eg petrol, wages Payment for purchases (stock for resale) Purchase of fixed assets

The cash flow forecast is broken down into segments of time: Layout The cash flow forecast is broken down into segments of time: Weeks Months Days

Layout The first section records the money coming into the business. heading money gained through the sale of goods or services money received from a third party – will require repayment plus interest total flow of income into the business

This is totalled at the end of the time segment. Layout The second section records the expenditure made by the business during each segment of time. This is totalled at the end of the time segment.

Layout All figures in £ January February Income Sales 600 1,000 Loan Total Income 1,600 Expenditure Purchases 800 500 Wages 400 Total Expenditure 1,200 900

Layout The final section is where the calculations are made. The business needs to see if there has been a greater outflow than inflow of money. Opening balance – the money that was available within the bank/cash account at the beginning of the time period Closing balance is opening balance add total inflow/outflow Inflow/outflow is total income minus total expenditure

Layout Using the example above: January February Opening Balance 300 700 Total income 1600 Total expenditure 1200 Inflow/outflow 400 Closing Balance Using the example above: The opening balance in January was £300 Total income £1,600 – Total expenditure £1,200 = £400 Closing balance was opening balance + inflow/outflow = £700 The closing balance of January is the opening balance of February

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