HOME ABOUT US ARTICLES BLOG FAQ CONTACT US
HOME ABOUT US ARTICLES BLOG FAQ CONTACT US
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software

Articles Blog

Cashflow tip – Purpose of Cashflow Statement, meaning and what it shows

images/CashFlow.jpgThe Cashflow Statement is also called the Statement of Cashflows, and here we explain the meaning of, and look at what the statement shows us. It is one of the 3 main financial statements that businesses report on – the other 2 are Profit & Loss, and The Balance Sheet.

The cash flow statement reports the actual cash generated and used during the time interval stated in its heading. The period of time that the statement covers is chosen by the company, for example, "For the Three Months Ended 31 December, 2015" or "The Fiscal Year Ended September 30, 2016". Most common is annual.

The cash flow statement actually uses data and the CHANGES between periods from the Profit & Loss and Balance Sheet, and organises and reports the cash generated and used in the following categories:

Operating, Investing and Financial activities

What the Cashflow Statement shows

The profit & loss or Income Statement is prepared under the accrual basis of accounting, meaning the sales/revenues reported may not have been collected yet. Similarly, the expenses reported on the income statement might not have been paid. You could review the balance sheet changes to determine the facts, but the cash flow statement already has integrated all that information. As a result, savvy business people and investors utilize this important financial statement.

Here are a few ways the statement of cash flows is used.

  1. The cash from operating activities is compared to the company's net income (profit/loss). If the cash from operating activities is consistently greater than the net income, the company's net income or earnings are said to be of a "high quality". If the cash from operating activities is less than net income, a red flag is raised as to why the reported net income is not turning into cash.
  2. Some investors believe that "cash is king". The cash flow statement identifies the cash that is flowing in and out of the company. If a company is consistently generating more cash than it is using, the company will be able to increase its dividend, buy back some of its stock, reduce debt, or acquire another company. All of these are seen to be good for shareholder value.
  3. There are also some financial models that use the cash flow.

The statement of cash flows has four distinct sections:

  1. Cash generated from operating activities
  2. Cash generated from investing activities
  3. Cash generated from financing activities
  4. Supplemental information

The differences in a company's balance sheet accounts from one period to the next, will provide much of the needed information. The changes—or differences—in the account balances will likely be entered in one of the sections of the statement of cash flows.

Of the four sections of the statement of cash flows, those balance sheet accounts which affect each section include -

1. Operating Activities

This section reports the net income and then converts it from the accrual basis to the cash basis by using the changes in the balances of current asset and current liability accounts, such as:

Accounts Receivable
Inventory
Prepaid Insurance
Other Current Assets
Notes Payable
Accounts Payable
Wages Payable
Payroll Liabilities
Interest Payable
Income Taxes Payable
Unearned Revenues
Other Current Liabilities

Note – as well as using the changes in current assets and current liabilities, the operating activities section may list adjustments for depreciation expense and for the gains and losses on the sale of long-term assets/investments.

2. Investing Activities

This section reports changes in the balances of long-term asset accounts, such as:

Long-term Investments
Land
Buildings
Equipment
Furniture & Fixtures
Vehicles

Investing activities involve the purchase and/or sale of long-term investments and property, plant, and equipment.

3. Financing Activities

This section reports changes in balances of the long-term liability and stockholders' equity accounts, such as:

Notes Payable (generally due after one year)
Bonds Payable
Deferred Income Taxes
Preferred Stock
Paid-in Capital in Excess of Par-Preferred Stock
Common Stock
Paid-in Capital in Excess of Par-Common Stock
Paid-in Capital from Treasury Stock
Retained Earnings
Treasury Stock

Financing activities involve the issuance and/or the repurchase of a company's own bonds or shares as well as short-term and long-term borrowings and repayments.

4. Supplemental Information

This section of the cash flow statement reports the amount of interest and income taxes paid as well as significant exchanges not involving cash. For example, the exchange of company shares for company bonds would be reported here.

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email This email address is being protected from spambots. You need JavaScript enabled to view it. or call 0407 361 596 Australia
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Business Tax Tip – JobKeeper – Is it GST free, in the GST turnover and is it taxable income?

images/Business Tax Tips.PNG"Is JobKeeper GST free, included in GST turnover and taxable income?" is often asked. Jobkeeper (JK) is a subsidy to businesses with employees and PAYG obligations, to support business payroll costs to help them survive the downturn of COVID-19.

Direct answers from the ATO (Aust. Tax Office) are the best advice –

Not Subject to GST

JobKeeper payments are not subject to GST and are not required to be reported on your BAS. See ATO community

Is JK included in the G1 GST turnover of the BAS?

No, don’t include in any part of your BAS, as the ATO staff say on the community confirms that the JobKeeper payment is not required to be reported on your activity statement.

Is JK assessable income – business / sole trader?

Partnerships, trust and companies - the JobKeeper payments are considered assessable income for the business or individual receiving the payments. The assessable income will need to be reported in the relevant financial year’s income tax return.

Sole traders - as a sole trader they will need to be included on your personal income tax return.

Get a FREE 30 min answer to your query, and FREE ongoing email or phone support – No-one offers as much!

Or ask a question - Email info@accountkeepingplus.com.au or call 0407 361 596 Australia

~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~

More Articles...

  1. Business Tips – 21 Business Tips for Success from Winning Business Examples
  2. Business Tips – Aust. Federal Budget 2020 - overview
  3. Business Financials – What is Working Capital
  4. Cashflow Tip – How can a company / business have a profit but not have cash?
  5. MYOB – Payroll Cash out Annual Leave – How to reduce the Holiday Leave Accrual
  6. Business Tax Tip – Correcting GST mistakes – Common errors and how to correct them
  7. Business Financials – What is Current Ratio formula / meaning & what does it show us?
  8. Bookkeeping – Is JobKeeper included in Workcover Remuneration – What is included
  9. Xero TPAR – Set up Taxable Payments Annual Report – Account Right
  10. MYOB TPAR – Set up Taxable Payments Annual Report – Account Right
  11. Business Tax Tip – TPAR – All you need to know – Taxable Payments Annual Reports – 28 August Annually
  12. Bookkeeping – End of year June final pay falls in new financial year and paid in July
  13. MYOB – Tax Tables for 2020-2021 – to v19 (Classic MYOB)
  14. QBO – Quickbooks Online – Year End Business Tax Planning – Support to prepare the books/accounts!
  15. RECKON – Year End Business Tax Planning – Support to prepare the books/accounts well!
  16. XERO – Year End Business Tax Planning – Support to prepare your books/accounts well!
  17. MYOB – EOFY – End of Financial Year Business Books – MYOB Account Right and Essentials
  18. Business Tax Tip – How to prepare for year-end accounting - Last 9 of 18 tips
  19. Business Tax Tip – How to prepare for year-end accounting - first 9 of 18 tips
  20. Business Finance 101 – Year End Business Planning – Checklist – Preparing for a great Year End!
  21. Business Financials – What does Equity mean?
  22. Business Tips – COVID Support Packages SIMPLIFIED – Aust. Govt.
  23. Business Tips – JobKeeper Payment - SIMPLIFIED – How to enter Payroll when pay is under $750 week ($1500 fortnight)
  24. Business Financials – How to understand Cost of Sales / Cost of Goods Sold
  25. Xero Bookkeeping – How to handle overpayment in Xero, and how to refund overpayment
  26. Bookkeeping – 7 top bookkeeping tips for healthy small business in Australia
  27. Business Tax Tip – GST on Hire Purchase
  28. MYOB-Xero-Reckon bookkeeping – How to remove “to be printed” item from a print queue
  29. Cash Flow Tip – 5 ways on how you can improve cash flow in 30 days!
  30. Business Tax Tip – What is Instant Asset Write Off 2019
  31. Business Tips
  32. Cashflow Tip – How does Team-building affect your Cashflow in Business?
  33. Bookkeeping – Tip – Avoid using Miscellaneous or Sundry Accounts
  34. Business Tax Tip – Business Record Keeping ATO – Requirements and what to keep and how long
  35. Business Financials – What is the difference between Liability and Debt – Debt vs Liability
  36. Cashflow Tip – Business or Personal Expenses claimed – What is the long-term plan? Business lessons
  37. Business Tax Tip – Employer of working holiday makers and tax rates
  38. Cashflow tip – How your Company Cashflow affects your Employees
  39. MYOB – How to delete old items in Account Right (AR)
  40. Cashflow tip – Improve Cashflow by your invoicing!
  41. Business Tax Tip – What Tax and Super is on Commissions and Bonuses
  42. Business Tax Tip – Do I pay the tax due or spend the amount on growing my business?
  43. Bookkeeping – Paid Parental Leave - What is Parental Leave Pay Australia & how do you enter in the bookkeeping accounts?
  44. Business Financials – What are Generally Accepted Accounting Principles (GAAP) accounting - explained
  45. MYOB – Paying Superannuation for Employees – What reports to use
  46. Business Tax Tip – Taxable Payments Annual Report – TPAR – Now covers Building, Cleaning and Courier businesses!
  47. Business Tips –When you feel stuck – 5 ways to refresh and go again!
  48. Business Tax Tip – How to Correct GST errors
  49. Business Financials – What does the Accounting Equation Mean? What does it show?
  50. Cashflow tip – Ways to Manage Cash Flow in small Business – Understand Cash Flow
  51. MYOB – Tax Tables for 2019-2020 – to v19 (Classic MYOB)
  52. Business Tips – How to find your ideal client – Tips on how to define them
  53. Business Tax Tip – Single Touch Payroll – STP and the ATO – the new reporting method
  54. Cashflow tip – How we help to focus on key KPI to impact growth for our clients
  55. Business Tax Tip – Another 9 EOFY – End of Financial Year tax tips to prepare for Year End Now!
  56. Business Tax Tip – 9 EOFY, End of Financial Year Tax Tips to Start Year End Preparation NOW!
  57. Reckon / Quickbooks – Accounts Hosted and PC versions – How to set up and use ABA files to pay suppliers/creditors
  58. Reckon One – Simple Online Accounting – Reckon One Support, User Guides and How to use Reckon One
  59. Business Tax Tip – Tax on Annual Leave and Long Service Leave on Termination / Resignation Payout
  60. MYOB – How to set up child support in MYOB payroll
  61. Business Tax Tip – How to understand GST on the sale of assets
  62. Business Financials – The Accumulated Depreciation Asset Account on the Balance Sheet
  63. Cashflow tip – What is the difference between cashflow and budget?
  64. Reckon / Quickbooks – How to change the email message for sales invoices - Accounts Hosted and PC
  65. Business Financials – How to understand what “non-cash expenses” means and what types of non-cash transaction examples there are
  66. Cashflow tip – Top ways to have better cashflow – 5 top tips
  67. Business Tax Tip – Don’t get caught with Small Business Capital Gain Tax Concession thresholds
  68. MYOB – How to deal with overpaid retentions
  69. Business Financials – How to successfully understand the difference between Mark-Ups and Margins when pricing
  70. Business Tips – How to achieve successful selling
  71. Bookkeeping – How to enter Annual Leave that was missed?
  72. MYOB AR & Essentials – Paying super and Superstream in v19 (when not in the cloud yet) – Using the Super Portal by MYOB to be compliant
  73. Business Financials – Do you make Profit.. but have no Cash!
  74. Cashflow tip – Cashflow and Budget – What are they and how are they different?
  75. Business Financials – What is the Balance Sheet – An example and definition
  76. Reckon / Quickbooks – How to customise an invoice in Quickbooks / Reckon
  77. Business Tax Tip – Types of Business Structure in Australia – How profit is handled and taxed
  78. Business Financials – How does a Profit and Loss statement work?
  79. Cashflow tip – What does the Cash Flow Statement Show us?
  80. Business Tips – What is the last Competitive Advantage for a business?
  81. Business Financials – Tax Breaks for Business – Do they encourage and stimulate business innovation and the economy?
  82. MYOB Essentials – Assets and the CAP tax code for your Capital Purchases (assets)
  83. Bookkeeping – Redundancy – What is Redundancy Pay – How much is Redundancy pay?
  84. Xero/Reckon/MYOB - Bookkeeping entries for loans – Lending money to business
  85. Business Tax Tip – GST and Leasing – How it works
  86. Business Financials – Paying Superannuation for Employees
  87. Bookkeeping – BAS – What is the BAS statement and the accounting the bookkeeping needs to cover
  88. Cashflow tip – How to improve cash flow for business – 5 top things to act on NOW!
  89. MYOB Essentials – Why tax is appearing when only $300 is earned for the week, under the tax free threshold?
  90. Business Tax Tip – GST and Hire Purchase
  91. Cashflow tip – Making a Profit but have no cash – what are the reasons?
  92. Reckon ONE – How to Set Up and how to Report Taxable Payments Annual Report (TPAR) – and when due?
  93. Reckon / Quickbooks – How to Set up and How to Report Taxable Payments Annual Report (TPAR) – and when due?
  94. XERO – TPAR – Taxable Payments Annual Report – How to set up and report in MYOB AccountRight
  95. MYOB – TPAR – Taxable Payments Annual Report – How to set up and report in MYOB AccountRight
  96. Xero/Reckon/MYOB bookkeeping –Tax Tables for 2018-2019 – and which versions of MYOB - update
  97. Business Tax Tip – TPAR – Taxable Payments Annual Report
  98. MYOB Quickbooks Reckon Bookkeeping – New Tax Tables 2018-19
  99. Reckon / Quickbooks – Single Touch Payroll – STP – in Reckon One- Accounts Hosted and Accounts 2018
  100. Business Financials – Here are 5 End of Financial Year (EOFY) tips 2018
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software

CATEGORIES


CUSTOMER LOGIN





Forgot your password?
Forgot your username?
Create an account

YOUR CART

The cart is empty

Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software

CATEGORIES


CUSTOMER LOGIN





Forgot your password?
Forgot your username?
Create an account

YOUR CART

The cart is empty

Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
© Account Keeping Plus 2020   |   Website Design by Best Web Site Design Melbourne    |   Admin