Back Forum Reply New

Hotel Cash flow statement

The cash flow statement provides an overview of
the cash inflows and outflows of an organization.
While the profit and loss (income) statement can
provide one perspective on the organization’s
profit performance, it fails to provide an indication
of the organization’s cash flows. This is
because the profit and loss statement is prepared
on the basis of accrual accounting and not cash
flow accounting. One example of why the profit
reported in the profit and loss statement does not
represent cash flow is the fact that depreciation
of fixed assets is included as an expense in the
profit and loss statement. There is, however, no
cash flow associated with depreciation. It merely
represents the allocation of the cost of an asset
that might have been purchased several years
earlier. The statement of cash flows can thus be
seen to provide useful supplementary information
to that provided in the profit and loss statement.
In the statement of cash flows example
presented below, cash flow from operations represents
the normal trading operations’ cash
receipts minus the cash payments associated
with normal trading activities. The remainder of
the terms used in the statement are relatively
self-explanatory.
                      ABC Hotel
Cash Flow Statement the year ending
       31 December 200X, in US$
                                                $                  $
Net cash flow from
operations                                                210,000
Cash flow from investments
and for servicing finance:
Interest on loan capital           (5,000)
Drawings                             (125,000)
(130,000)
80,000
Investing activities:
Fixed assets purchased          (54,000)
Proceeds from fixed
assets sales                           22,000
                                                               (32,000)
                                                                48,000
Sources of finance:
Capital introduced                  18,000
Loan raised                            4,000
                                                                22,000
Net cash flow for the year                            70,000
Share |
Back Forum