Distinguish between a cash flow statement and cash budget

 Cash Flow Statement :

A cash flow statement documents the amount of incoming and outgoing cash (and its equivalents). Only cash sales are recorded in a cash flow statement – all future sales (including those made on credit) are not declared. The biggest bulk of your cash flow is usually from your core operations. Document the movement of your receivables and payables, inventory and depreciation.

 A cash flow statement can help you forecast future cash flow and budgets, and also give your investors a clear picture of your company’s financial health.

 

27# Cash Budget:

The cash budget is composed of four major sections:

1.The receipts section

2.The disbursements section

3.The cash excess or deficiency section

4.The financing section

 The receipts section consists of a listing of all of the cash inflows, except for financing, expected during the budget period. Generally, the major source of receipts will be from sales.

The disbursements section consists of all cash payments that are planned for the budget period. These payments will include raw material purchases, direct labor payments, manufacturing overhead costs, and so on, as contained in their respective budgets.

If there is a cash deficiency during any budget period, the company will need to borrow funds. If there is a cash excess during any budget period, funds borrowed in previous periods can be repaid or the excess funds can be invested.

The financing section details the borrowings and repayments projected to take place during the budget period. It also includes interest payments that will be due on money borrowed.

Generally speaking, the cash budget should be broken down into time periods that are as short as feasible.