The full cash flow statement

To prepare the full cash flow statement from two balance sheets:

• Rebuild net profit before tax from the surplus, transfers to reserves, tax provided and dividends.
• Work the operating section (A) by the indirect method.
• Work the investing (B) and financing (C) sections from the ledger workings.

Dividends: last year's proposed dividend, approved by the shareholders this year, is paid this year. Add it back when finding profit before tax, and show it as an outflow under financing.

The check: net increase or decrease in cash (A + B + C) + opening cash and cash equivalents = closing cash and cash equivalents. Include short-term marketable investments if they are cash equivalents.

Example: A is 2,40,000; B is (1,80,000); C is (20,000). Net change = +40,000. With opening cash of 60,000, closing cash should be 1,00,000, exactly the figure in the closing balance sheet.

If the check fails, a figure or a sign is wrong somewhere: go back and look.