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The calculations for the cash flows
Actual amount of cash paid or received during the period needs to be established. This can get quite tricky as there would be accruals bought forward, carried forward and prepayments bought forward and carried forward. There will also be transactions which don't affect cash flow such as depreciation and re-valuations.
Best way of doing this is to set up a "T"account, fill in all the relevant information and balancing figure will be cash figure. For direct method, "T" accounts can also be used toestablishreceipts from customers, cash payments to suppliers etc.
Illustrations of "T"accounts to establish cash flow.
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