1. Cash Flows

2. Cash Movements Assets are everything of value that is owned by an entity. A future benefit or Potential Gain Purchasing ASSETS will decrease your bank balance – Property Purchase – Vehicle Purchase – Pant & Equipment Purchase – Providing Finance – Legal Action

3. Cash Movements An obligation that legally binds an individual or company to settle a debt. Liabilities in the form of Borrowings will increase your bank balance. – Loans – Trade Credit – Taxes – GST

4. Cash Movements Expenses Any cost incurred resulting from revenue-generating activities. Paying Expenses will decrease your bank balances – Repayment of Loans – Paying Trade Accounts – Purchases

5. Cash Movements Income is cash inflow to the entity during the accounting period resulting from revenue- generating activities Income received by the entity will increase the bank balance – Progress Claim – Bank Interest – Dividends

6. Profit v’s Cashflow Profit is an arbitrary measurement Tax Profit is measured 1 st July to 30 th June Corporations Law requires a some companies to produce a report to determine profit. Generally same as Tax In USA same as calendar In UK, March to March

7. When Should Profit Be Measured Project Value $10 000 000 Start Date1 st July 2005 End Date30 th June 2007 YEAR 2005 1/07/20051/08/20051/09/20051/10/20051/11/20051/12/2005 Expenses $ 416,666.67 Income $ 500,000.00 YEAR 2006 1/01/20061/02/20061/03/20061/04/20061/05/20061/06/2006Total 05/06 Expenses $ 416,666.67 $ 5,000,000.00 Income $ 500,000.00 $ 6,000,000.00 Profit = $1 000 000 x 30% = $300 000

8. YEAR 2005 1/07/20051/08/20051/09/20051/10/20051/11/20051/12/2005 Expenses $ 416,666.67 Income $ 500,000.00 YEAR 2006 1/01/20061/02/20061/03/20061/04/20061/05/20061/06/2006Total 05/06 Expenses $ 416,666.67 $ 5,000,000.00 Income $ 500,000.00 $ 6,000,000.00 YEAR 2006 1/07/20051/08/20051/09/20051/10/20051/11/20051/12/2005 Expenses $ 416,666.67 Income $ 333,333.33 YEAR 2007 1/01/20061/02/20061/03/20061/04/20061/05/20061/06/2006Total 06/07 Expenses $ 416,666.67 $ 5,000,000.00 Income $ 333,333.33 $ 4,000,000.00 Profit Year 05/06 =$1 000 000 Loss Year 06/07=$1 000 000 Over Project Life it broke even But $300 000 tax was paid

9. Profit v Cash Flows Materials Purchased On Credit Credit Sales Telephone Bill Paid Taxes Incurred Completed Job New Capital Equipment Depreciation of an Asset Capital Withdrawals Business Borrowings Negative Profit Positive Cashflow Positive Profit Negative Cashflow` Negative Profit Negative Cashflow Negative Profit Positive Cashflow Positive Profit Negative Cashflow No Effect Profit Negative Cashflow Negative Profit No Effect Cashflow No Effect Profit Negative Cashflow No Effect Profit Positive Cashflow

10. Cash Flows v Profits Cash Accounting – is where your business records the flow of money An accounting method where receipts are recorded during the period they are received, and the expenses in the period in which they are actually paid

11. Cashflows v Profits ACCRUAL ACCOUNTING - An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur

12. Accrual V Cash Example

13. Scan Question Here

14. Cashflow Exercise Page 6

16. Cash Flow Example Page 7