CIMA F1 Syllabus B. Financial Statements - Cash paid / received - Notes ^{5 / 7}

General Method Explanation

Let’s say you owed somebody 100, then bought 20 more in the year - you should therefore owe them 120 right?

However you look at your books at the year end and you see you only owe them 70

Therefore, you must have paid cash to them of 50 - this is the figure we then put in our cash-flow statement.

To show this differently:

We will now go on to look at the different items that you may find in the income statement and how we deal with them in the cash-flow statement using this method.