OHT 5.2           The relationship between the balance 
                         sheet, the profit and loss account and 
                                       the cash flow statement
                   Owners’                          Profit and loss                       Owners’ 
                     claim                              account                             claim
                 Balance sheet                                                         Balance sheet 
                 at the start of                                                        at the end of 
                the accounting                                                         the accounting 
                      period                                                                period
                      Cash                      Cash flow statement                         Cash
      © Pearson Education Limited 2003                Atrill, McLaney: Accounting and Finance for Non-Specialists, 4th edition
         OHT 5.3                  Standard layout of the cash flow 
                                                          statement
                                                    Net cash flow from 
                                                   operating activities               plus or 
                                                                                       minus
                                              Returns on investments       
                                                               and servicing of       plus or 
                                                           finance                     minus
                                                          Taxation
                                                                                      plus or 
                                                                                       minus
                                                   Capital expenditure
                                                                                      plus or 
                                                                                       minus
                                                  Equity dividends paid
                                                                                       plus or 
                                                                                       minus
                                                  Management of liquid 
                                                          resource                     plus or 
                                                                                       minus
                                                         Financing
                                                                                      equals
                                                Increase or decrease in 
                                                  cash over the period
      © Pearson Education Limited 2003                      Atrill, McLaney: Accounting and Finance for Non-Specialists, 4th edition
        OHT 5.4             Diagrammatic representation of the 
                                           cash flow statement
                                                                                  Returns on 
                             Capital                                             investments   
                          expenditure                                            and servicing 
                                                                                   of finance
                                                         Cash  
                                                       balance
                             Equity 
                           dividends                                                Taxation
                               paid
                                                     Management                    Operating 
                           Financing                     of liquid                  activities
                                                        resources
      © Pearson Education Limited 2003                Atrill, McLaney: Accounting and Finance for Non-Specialists, 4th edition
        OHT 5.5                Deducing net cash inflows from 
                                            operating activities
                                                       There are two methods 
                                                               that can be used:
                                                        The direct method
                                                       The indirect method
      © Pearson Education Limited 2003                Atrill, McLaney: Accounting and Finance for Non-Specialists, 4th edition
        OHT 5.6         The indirect method of deducing the net 
                         cash flow from  the operating activities
                                            Net operating profit
                                                                                            plus
                                          Depreciation expense
                                                                               plus or minus
                                           Increase (minus) or 
                                        decrease (plus) in stock
                                                                               plus or minus
                                     Increase (minus) or decrease 
                                              (plus) in debtors
                                                                               plus or minus
                                     Increase (minus) or decrease 
                                            (plus) in creditors
                                                                                        equals
                                     Net cash flow from operating 
                                                  activities
      © Pearson Education Limited 2003                Atrill, McLaney: Accounting and Finance for Non-Specialists, 4th edition