CM 2 mark

Cash flow statement ?

In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. International Accounting Standard 7 (IAS 7), is the International Accounting Standard that deals with cash flow statements.

The Cash Flow Statement is divided into three distinct sections:

Cash flow from operations Cash flow from investing activities Cash flow from financing activities Difference between source and use of cash ?

The Sources and Uses of Cash Statement tells you all about where your money came from and where it went for some period in the past. If your business uses Cash basis the Statement will look very much like your Income Statement, If, like most businesses, you use Accrual basis the Statement won't bear much resemblance to your Income Statement, Preparing the Sources and Uses of Cash Statement There are three quite different approaches that can be used in preparing the Statement if you are using Accrual basis

The Journal Method The Check and Deposit Method The Modified Check and Deposit Method

what is budget
Definition: A budget is a financial document used to project future income and expenses. The budgeting process may be carried out by individuals or by companies to estimate whether the person/company can continue to operate with its projected income and expenses. A budget may be prepared simply using paper and pencil, or on computer using a spreadsheet program like Excel, or with a financial application like Quicken or QuickBooks. The process for preparing a monthly budget includes:

Listing of all sources of monthly income Listing of all required, fixed expenses, like rent/mortgage, utilities, phone Listing of other possible and variable expenses.

what is meant by budgeting ?

Through budgeting, small businesses can better plan for financial success. While budgeting is a task that many individuals undertake within their households, for a business, budgeting requires the completion of a much more complicated process. To budget effectively, business owners and the financial professionals with whom they work must not only track their income and expenses, but also forecast likely needs, ensuring that they remain in the green and ready to pay bills.
The word 'budget' has a few different meanings: 1: a sum of money allocated for a particular purpose; 2: a summary of intended expenditures along with proposals for how to meet them; 3: make a budget A budget is a co-ordinating & comphehensive plan used in finance and operations but expressed in financial terms within a definite time period.

budgeting control
There are two types of control, namely budgetary and financial. This chapter concentrates on budgetary control only. This is because financial control was covered in detail in chapters one and two. Budgetary control is defined by the Institute of Cost and Management Accountants (CIMA) as: "The establishment of budgets relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy, or to provide a basis for its revision"
A control technique whereby actual results are compared with budgets.

Any differences (variances) are made the responsibility of key individuals who can either exercise control action or revise the original budgets. What is a flexible budget? A flexible budget is a budget that adjusts or flexes for changes in the volume of activity. The flexible budget is more sophisticated and useful than a static budget, which remains at one amount regardless of the volume of activity.Assume that a manufacturer determines that its cost of electricity and supplies for the factory are approximately $10 per machine hour (MH). It also knows that the factory supervision, depreciation, and other fixed costs are approximately $40,000 per month. Typically, the production equipment operates between 4,000 and 7,000 hours per month. Based on this information, the flexible budget for each month would be $40,000 + $10 per MH.