Cash Flow Groups

❑Understanding Cash Flow Groups - There are several predefined Cash Flow Groups

One of these system predefined Cash Flow Groups will need to be assigned to certain General Ledger Accounts - as specified in this Cash Flow Groups chapter - to be able to produce a proper Cash Flow Statement.

•The Cash Flow Statement provides a typical Statement of Cash Flows that reports the Description and Amount Totals of what Operating, Financing, and Investing related Financial Transactions increased and/or decreased the net Value of your Company's Cash Position.

✓The system calculates Net Cash Flow as follows:

a)Calculate the Operating Value (The Net Income from a selected Accounting Period + Change in Operating Activities from end of previous Accounting Period to end of current - selected - Accounting Period)

b)Then, subtract the Inventing Value (Change in Investing Activities from end of previous Accounting Period to the end of current Accounting Period)

c)Then, subtract the Financing Value (Change in Financing Activities from end of previous Accounting Period to end of current Accounting Period)

✓The result is the Net Cash Flow for the selected Accounting Period being reported.

•Because each Company chooses the Titles and Account Numbers assigned to the General Ledger Accounts associated with Cash Flow Statement, your Company must also identify those Cash Flow related Accounts

✓This is accomplished by assigning the Cash Flow Statement related General Ledger Accounts to the appropriate Cash Flow Group.

•Only specified types of General Ledger Accounts reported on the Balance Sheet (i.e., Asset, Liability, and Equity Accounts) will be assigned to a Cash Flow Group.

❑Assigning Cash Flow Groups - There are three types of General Ledger Accounts which should be assigned to a Cash Flow Group

1.Financing - General Ledger Accounts used to track and record:

a.Credit Card Accounts (Liabilities)

b.Loans/Notes Payable, Dividends Owed (Liabilities)

c.Company Stock (Equity)

2.Investing - General Ledger Accounts used to track and record:

a.Fixed Asset Accounts (e.g., Buildings, Land, Leasehold Improvements, Vehicles)

b.Investment Accounts (e.g., Mutual Funds, Stock Purchases)

3.Operating - General Ledger Accounts used to track and record:

a.Accounts Receivable Account (a Mandatory Account)

b.Accounts Payable Account (a Mandatory Account)

c.Inventory Account (a Mandatory Account)

d.WIP Inventory Account (a Mandatory Account)

e.Local Tax (Liability) Account (a Mandatory Account)

f.National Tax (Liability) (a Mandatory Account)

g.Employee Receipts Account (Employee loan repayments)

h.Employee Payments Account (loans made to Employees)

i.Customer Deposit (Liab) Account (a Mandatory Account)

•These are the General Ledger Accounts which should Not be assigned to a Cash Flow Group

a.The Earnings Posting Account (a Mandatory Account)

b.The Undeposited Funds Account (a Mandatory Account)

c.The Current Earnings Account (a Mandatory Account)

d.The Retained Earnings Account (a Mandatory Account)

e.The Undeposited Funds Account (a Mandatory Account)

f.No Sales or Expense Accounts are ever assigned to a Cash Flow Group