OCR Level 3Cambridge Technicals

in Business

Unit 4: Business Accounting

Cash Flow Forecast

Cash Flow ForecastCash Flow ForecastThe cash flow records money flowing in and out

of the business.

Income is recorded on the date the money

was received

Expenditure is recorded on the date the

payment was made

DefinitionsDefinitionsIncome - money that has come into the

business and includes:

Initial capital (money) to start the business

Money received from sale of products or services offered

Money received from loans

Money received from the sale of fixed assets

DefinitionsDefinitionsExpenditure – any money that is spent during the

normal activities of the business. It can include:

Payment for expenses, eg petrol,

wages

Payment for purchases (stock

for resale)

Purchase of fixed assets

LayoutLayoutThe cash flow forecast is broken down into

segments of time:

Months

Weeks

Days

LayoutLayoutThe first section records the money coming

into the business.heading

money gained through the sale of goods or services

money received from a third party – will require repayment plus interest

total flow of income into the business

LayoutLayoutThe second section records the expenditure made by the business during each segment

of time.

This is totalled at the end of the time segment.

LayoutLayout

All figures in £ January February

Income

Sales 600 1,000

Loan 1,000 0

Total Income 1,600 1,000

Expenditure

Purchases 800 500

Wages 400 400

Total Expenditure 1,200 900

LayoutLayoutThe final section is where the calculations are made. The business needs to see if there has been a greater outflow

than inflow of money.

Opening balance – the money that was available within the

bank/cash account at the beginning of the time period

Inflow/outflow is total income minus total

expenditure

Closing balance is opening balance add total inflow/outflow

LayoutLayoutJanuary February

Opening Balance 300 700

Total income 1600

Total expenditure 1200

Inflow/outflow 400

Closing Balance 700

Using the example above:

The opening balance in January was £300

Closing balance was opening balance + inflow/outflow = £700

The closing balance of January is the opening balance of February

Total income £1,600 – Total expenditure £1,200 = £400

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