7. Interpreting Financial Reports

7.3. Statement of Cash Flow

The Statement of Cash Flow indicates the flow of cash within an organisation and assists in planning how and when money can be spent. 

Cash Flow is essential for the survival of the organisation.  Without cash an organisation can get into financial difficulty very quickly and will not be able to pay its bills. 

The Statement of Cash flow enables an organisation to budget for the future, to foresee any critical periods when funds might be limited.  It can also assist in determining if a large cash outlay on capital expenditure is affordable or whether it would be more appropriate to lease an item. 

 

Terms used in statement of Cash Flow 

Expenditure 

The amount the organisation has spent during the month. 

Balance 

The amount that is left to be spent.  This amount can be carried over to the next month and spent then instead. 

Brought Forward 

The balance amount may be carried over to the next months and spent then instead.   

Income 

The money the organisation receives or is shortly due to receive.  In this case money is being received from a grant, membership fees, donations, some bank interest and wages recovery.  Another term often used instead of income is Revenue.