Learning aim E

Cash inflows/receipts

Cash inflows/receipts

-The money coming into the business

-Money flows into the business when income is received.

Cash outflows/payments

-The money going out of the business

-Money flows out of a business when payments are made.

Cash sales

when customers paid for it at the time of the purchase

Credit sales

paid for the products however it takes time for it to be paid for

Value added tax

Value Added Tax is charged on most goods and services. A business must be registered for VAT if its sales go over the VAT threshold (£82 000 in 2015). The business adds VAT to the cost of its goods and services.

Cash flow forecast

a prediction of the expected cash balance at the end of each month in the future

Opening balance

the amount of cash the business has the start of the month

Total cash inflow

the total cash the business expect to receive during the month

Total cash outflow

the amount of cash the business expects to spend during the month

Inflow-outflow

the difference between the cash coming in and out of the business

Closing balance

the opening balance + the difference between the cash coming in and the cash coming out.

Purchase of assets

These are small and large expenditures on items, from computer printers and telephones to vehicles and expensive machinery and buildings

Rent, rates, salaries, wages and utilities

These are all regular outflows. The business must have the cash to cover these.

Cash and credit purchases

Anything a business buys is an outflow whether it is for use by the business or resale, e.g. raw materials, stationery.

loan outflow

Money borrowed by the business from an external source

capital introduced

Funds invested in the business by the owner or shareholders

sales of assets

Money received from selling an asset, e.g. machinery

bank interest received

the business may store money in a savings account on which the bank will pay interest