This template enables users to automatically compile a complete cash flow statement by simply entering basic income statement and balance sheet information. The template includes a current and comparative financial period and detailed instructions on the calculation of the line items which are included on the cash flow statement. The template includes statements of cash flow that have been compiled based on both the direct and indirect methods.
The following sheets are included in this template:
Input - this sheet includes all the input cells used in compiling the cash flow statement. User input consists of an income statement and a balance sheet section as well as some additional information which is required in order to produce a cash flow statement.
Direct - this sheet contains a cash flow statement based on the direct method which is automatically calculated from the information entered on the Input sheet. No user input is required on this sheet.
Indirect - this sheet contains a cash flow statement based on the indirect method which is automatically calculated from the information entered on the Input sheet. No user input is required on this sheet.
User Input
All the cells on the Input sheet which require user input are indicated by a yellow or green cell background in the column to the right of the appropriate input cell. The cells which are indicated in yellow require positive values to be entered, while the cells which are indicated in green require negative values to be entered. Cells that don't have a yellow or green colour next to them contain formulas and should be left unchanged.
If you are concerned about replacing the formulas in the cells that do not require user input, we recommend that you protect the sheet with a user defined password. Only valid input cells will then be available for user input. The Protect Sheet feature can be accessed by selecting the Review tab on the ribbon and selecting the Protect Sheet option from the Changes section of the ribbon. You will then be required to enter and to confirm a user defined password (all input cells have already been unlocked in order to allow user input).
The default reporting periods can be amended by simply entering a new year in cell B2. All the other cells in this template that contain references to the reporting periods will automatically be amended.
The additional information section requires users to specify whether any business acquisitions, disposals of property, plant and equipment or intangibles and raising of long term finance occurred during the current and previous financial periods. The default input values in these cells can be replaced by nil values if they are not applicable.
You'll also notice that three years' balance sheet information is required in order to produce a cash flow statement with accurate comparative data.
The Input sheet also contains 4 control totals in rows 56 to 59 which should all be nil otherwise the cash flow statements will not balance. Each of these control totals are covered in more detail in the Control Totals sub section of these instructions which follows next.
Control Totals
The balance sheet control total in row 56 has been added to the sheet in order to highlight an imbalance on the balance sheet after entering the required balance sheet information. If an imbalance is encountered, the appropriate cells in this row will be highlighted in orange and it simply means that your balance sheet does not balance which will also result in your cash flow statements not balancing.
The depreciation control total in row 57 highlights an inconsistency between the depreciation charges in the income statement and the accumulated depreciation charges in the balance sheet (with disposals being taken into account). The income statement charges are added back in the cash flow statement which means that if these charges are not consistent with the balance sheet movement in accumulated depreciation, the cash flow statement may not balance as a result of this inconsistency.
The amortization control total in row 58 basically functions in the same way as the depreciation control total but is applied to amortization and accumulated amortization on intangibles instead of depreciation on property, plant and equipment. The same principle applies - the income statement charges are added back on the cash flow statement and if these charges are not consistent with the movement in accumulated amortization, the cash flow statements may not balance.
The retained earnings control total in row 59 tests whether the balance sheet movement in the retained earnings line is consistent with the profit or loss for the period. If it is not, it indicates that other adjustments (like for example a prior year adjustment) have been made directly against retained earnings instead of being included in the income statement. If such adjustments have been made, the adjustments would need to be included in the adjustment section of the cash flow statements on the Direct and Indirect sheets.
Cash Flow Statement Calculations
This section of the instructions provides more information on the calculations which are performed for each line item on the cash flow statements. Note that both cash flow statements are calculated automatically and no user input is therefore required on either the Direct or Indirect sheets.
Cash receipts from customers
This amount is calculated by adding the appropriate turnover amount to the opening trade accounts receivable balance and the trade accounts receivable balance which forms part of business acquisitions for the particular period. The closing trade accounts receivable balance is then deducted from this total in order to calculate the amount of cash which has been received from customers.
Cash paid to suppliers and employees
This amount is determined by calculating the cash generated from operations and deducting it from the cash receipts from customers. The calculation of cash generated from operations is discussed in the next section.
An alternative calculation of the cash paid to suppliers and employees is as follows:
Profit before taxation
Less: Turnover
Add: Depreciation
Add: Amortization
Add: Interest expense
Less: Investment income
Add: Other non-cash items which are included in expenditure (for example: loss on disposal of equipment or intangibles)
Add: Inventory opening balance
Less: Inventory closing balance
Add: Trade payables closing balance
Less: Trade payables opening balance
As you can see, this calculation is quite complicated and we therefore recommend calculating the cash generated from operations and then simply deducting the cash receipts from customers from this amount.
Cash generated from operations
A detailed calculation of this amount is included below the cash flow statement on the Direct sheet and at the top of the cash flow statement on the Indirect sheet. The calculation starts with the profit or loss before taxation and all non-cash income & expenses and items which are included in other line items on the cash flow statements are then added back from the calculated amounts.
Investment income and interest expenses are added back because these items are included separately on the cash flow statement. The depreciation, amortization, profit or loss from sale of property, plant & equipment and profit or loss from the sale of intangibles are non-cash items and are therefore also added back. Balance sheet movements in reserves are also non-cash items and also added back.
The net effect of all working capital balances is then deducted in the calculation because these items also form part of operating cash flow. Note that an increase in accounts receivable and inventory results of an outflow of cash and should therefore be deducted. An increase in payables, however, results in an inflow of cash (because less payments are made to creditors) and should therefore be added in the calculation. A decrease in payables is therefore an outflow of cash and should be deducted.
Note: The receivables and payables lines include multiple balance sheet items which have been consolidated into a single line for cash flow statement purposes. Trade receivables, loans & advances and other receivables are grouped together in the receivables lines and trade payables, sales tax, payroll accruals and other accruals are grouped together in the payables lines on the cash flow statements.
Interest, Income Tax and Dividends
These amounts are all calculated by adding the appropriate income statement amounts to the opening balance of the appropriate provisions (liabilities) and deducting the closing balance of the appropriate provisions from this calculation. All three amounts are negative because all three items result in an outflow of cash.
Business Acquisitions
This amount should be the total amount which was paid in order to acquire a new or existing business net of the cash amount received from the business acquired.
Also note that the amounts that are included in each individual asset class should be added to the appropriate opening balance of the asset class in determining the increase or decrease in the balance of each asset class. For example, in determining the increase in inventory, the inventory amount which forms part of the business acquisition section is added to the opening inventory balance on the balance sheet before deducting the closing inventory balance in order to determine the movement in inventory between the two financial years under review.
Purchase of property, plant and equipment
The amount of cash purchases of property plant & equipment is determined as follows:
Property, plant & equipment - closing balance at cost
Less: Property, plant & equipment - opening balance at cost
Less: Property, plant & equipment - acquired through business acquisitions
Add: Cost of assets which were sold during the period under review
Less: Acquisitions financed through financial leases
Note that the calculated amount is a cash outflow and should be included on the cash flow statement as a negative amount and that financial leases do not result in an immediate outflow of cash and should therefore be excluded from this line item. Payments of financial leases should be included under the financing activities section of the cash flow statement.
Also note that revaluations of property, plant and equipment should also be excluded from the cash flow statement by deducting the movement in the revaluation reserve in the above calculation.
Purchase of intangible assets
These amounts are calculated in much the same way as the property, plant and equipment amounts but are based on intangible assets instead. Finance leases also play no role in the calculation of intangible amounts because these are unique to property, plant & equipment.
Proceeds from sale of equipment or intangibles
These amounts are the cash amounts which are received after the sale of equipment or intangible assets and are included in the Additional information section on the Input sheet.
Acquisition of investments
This amount is calculated by deducting the closing investment balance from the opening investment balance and deducting any amounts received through business acquisitions.
Investment income
This amount is included in this section of the cash flow statement because it does not form part of operating cash flows. Note that investment income is deducted in the cash generated from operations calculation because it is included in the profit before tax and it is included as a separate line item on the cash flow statement.
Proceeds from issue of share capital
This amount is calculated by deducting the opening share capital balance from the closing share capital balance. An increase in share capital results in an inflow of cash.
Proceeds from long-term borrowings
This amount is specified in the Additional information section on the Input sheet and should include all the long term debt which was raised during the period under review, but should exclude all the finance leases that are deducted from the property, plant & equipment cash acquisitions total.
Payment of long-term borrowings
This amount is calculated as follows:
Long term debt closing balance
Less: Long term debt opening balance
Less: Long term debt included in business acquisitions
Less: Long term debt raised
Less: Finance lease acquisitions
The calculation should be included on the cash flow statement as a negative amount because the payment of long term debt results in an outflow of cash. The finance lease acquisitions should be excluded because this amount is set off against the property, plant & equipment acquisitions and the long term debt raised is deducted because it is included in a separate line item on the cash flow statement.
Cash Flow Statement Control Total
The cash balance control total in row 34 on the Direct sheet and row 45 on the Indirect sheet has been included in order to highlight an imbalance between the closing cash balance on the balance sheet and the closing cash balance on the cash flow statement. If an imbalance is encountered on one of these sheets, the appropriate cells in this row will be highlighted in orange.
