The Cash Flow Statement is one of the most important financial reports for understanding your business's liquidity. It shows how cash moves in and out of your organization during a specific period. In Ratals ERP, the report uses the Indirect Method, reconciling net income with changes in cash from operating, investing, and financing activities.
In this tutorial, we will cover:
The Indirect Method starts with net income from the Income Statement and adjusts for non-cash transactions, changes in working capital, and other adjustments to arrive at net cash provided by or used in operating activities. This method helps users understand the relationship between profit and actual cash movement.
To access the Cash Flow Statement in Ratals ERP:
The report is divided into three main sections, reflecting the types of cash flows:
Each section lists line items for individual accounts along with the associated cash impact. At the bottom, the report summarizes:
The report determines which accounts belong to each section based on the Cash Flow Category assigned to each account. Make sure each account is categorized correctly:
Accounts must have the correct Account Type for the Cash Flow calculation to work properly. Here's the full mapping:
Because Ratals calculates cash flow in real time, any changes to Cash Flow Category or Account Type will be reflected immediately when the report is refreshed.
Operating Activities begin with Net Income from the Income Statement. Since net income includes non-cash items, the system adjusts for changes in asset and liability accounts:
Ratals ERP calculates Operating Activities by:
Important: Only accounts with Cash Flow Category = Operating and Account Type = Revenue or Expenses (including Contra Accounts) are included in the calculation.
Investing Activities reflect cash movements related to long-term assets:
Important: Only accounts with Cash Flow Category = Investing and Account Type = Assets (including Contra Accounts) are included in the calculation.
Financing Activities track cash flows related to company financing:
Important: Only accounts with Cash Flow Category = Financing and Account Type = Liabilities or Equity (including Contra Accounts) are included in the calculation.
Ratals ERP determines the starting point for cash as the sum of all Cash accounts before the selected reporting period. This becomes the Beginning Cash Balance:
The report then adds the net changes from Operating, Investing, and Financing Activities to calculate the Ending Cash Balance:
Suppose your company has the following:
Using Ratals ERP's indirect method and assuming Beginning Cash Balance = $5,000:
By following these steps, your Cash Flow Statement in Ratals ERP will accurately reflect your company's cash movements for the selected period.
The Cash Flow Statement is a financial report that shows how cash enters and leaves your business over a specific period. It helps you understand liquidity, cash management, and the impact of business activities on cash balances.
The Indirect Method starts with net income from the Income Statement and adjusts for non-cash transactions, changes in working capital, and other adjustments to calculate net cash from operating activities. This method helps link reported profit to actual cash movements.
Navigate to Admin > Accounting > Financial Statements > Cash Flow Statement, select your reporting period using From Date and To Date, and click Search to generate the report.
Cash Flow Categories determine which section of the report an account appears in (Operating, Investing, Financing, or Cash). Correct categorization ensures that cash inflows and outflows are reported accurately.
Yes. Contra accounts are included in the Cash Flow Statement because they affect the net cash movement and are part of the Account Type mapping for Operating, Investing, and Financing activities.
Operating Activities calculation starts with Net Income, adjusts for changes in asset and liability accounts, and includes non-cash items such as depreciation and amortization. Only accounts with Cash Flow Category = Operating and correct Account Type (Revenue, Expenses, or their contra accounts) are included.
Investing Activities sum cash inflows from asset sales and outflows from asset purchases for accounts categorized under Investing. Only accounts with Cash Flow Category = Investing and Account Type = Assets (including contra accounts) are included.
Financing Activities sum cash inflows from equity or liability increases and outflows from equity or liability decreases for accounts categorized under Financing. Only accounts with Cash Flow Category = Financing and Account Type = Liabilities or Equity (including contra accounts) are included.
Beginning Cash Balance is the sum of all Cash accounts before the reporting period. Ending Cash Balance is calculated as Beginning Cash + Net Cash from Operating, Investing, and Financing Activities.
Yes. Ratals ERP calculates cash flow in real-time, so any changes to Cash Flow Category, Account Type, or Journal Entries are reflected immediately when the report is refreshed.
Compare Net Cash from Operating Activities to Net Income to assess quality of earnings, review investing and financing trends to understand cash use, and use the Ending Cash Balance to evaluate liquidity and plan for short-term obligations.