Help With Profit Figure in Cashflow Forecast

doyler442

I have a question about a Cashflow if someone could help me please - its for a college project.

This is Year 3 and its the last column and the total column of the cash flow summary
____________________________June ________Total
Opening Balance at July 1st___524428
Total Incoming Cash _______ 50700__________548840
Total Cash Out ____________31442__________362828
Closing Balance ___________543686

What we are doing is getting a profit of 186,012 by subtracting the two total figures above.

But I always thought that this figure had to match the closing balance in June.

If I add the cash brought forward from Year 2 to the total it does balance out but is this how it should be done?

hivizman

The cash balance at the beginning of Year 3 should be 357,674. You have received 186,012 more cash in during Year 3 than you have paid out [NOTE: this is NOT the same as the profit for the year, because it doesn't take into account things like depreciation, changes in inventories, accounts receivable and accounts payable, and prepayments and accruals, which would lead the accounting profit to be different from the net cash inflow]. Hence you have 543,686 cash at the end of Year 3.

Simple cash flow examples often start at the beginning of a business, with a zero initial cash balance, but as you are starting at the beginning of Year 3, you would expect there to be a cash balance (not necessarily positive, as there could be an overdraft) at the beginning of the year. The opening cash balance at the beginning of a period plus the net cash inflow during the period will be equal to the closing cash balance at the end of the period - your numbers show that this is the case for the month of June.