2. Cash:
Can be defined as money that’s contains coins and
notes, it is the most liquid assets.
Cash Flows:
Cash in and cash out in the business.
Net Cash Flows:
Net Cash Flows: Cash in – Cash
out

3. Cash Cycle: The time period between the inventory
payment and collection of receivables (generated in sales).
Operating cycle: Time period between get the supplier
inventory and collection of receivables (goods sold).
Cash Conversion (CC) = Average age of inventory (AAI) +
Average collection period (ACP) – Average payment period
(APP)

4. • Comes from three activities:
a)
Operating activities
Create revenue (receivables) or expenses (salary,
payables, etc.).
b) Investing activities
Lending and collecting loans, selling and buying assets
(PPE) that generate revenue in l/term and selling and
buying securities.
c) Financing activities
Borrowing and repaying money from payables, resources
from owners and both get return on the investment

5. Sources of cash
Uses of Cash
Obtaining finance:
•
in l/term debt
•
in equity
•
in current liabilities
Paying payables or stockholders:
•
in l/term debt
•
in equity
•
in current liabilities
Selling assets:
•
in current assets
•
in fixed assets (non-current
assets)
Buying assets:
•
in current assets
•
in fixed assets

6. Cash receipts and payment categories:
1.
2.
3.
4.
Revenue receipts and payments
Capital receipts and payments
Drawings/Dividends and disbursements
Exceptional receipts and payments

7. Patterns of revenue receipts and payments vary between
different types of business. Here are some of the
examples:
•
•
•
•
Retail business
Manufacturer
Large contracting business
Training University

8. CASH FLOW =
CASH IN (SALES + OPENING RECEIVABLES – CLOSING
RECEIVABLES)
CASH OUT (PURCHASES + OPENING PAYABLES – CLOSING
PAYABLES)
*Purchases = Cost of Sales + Closing Inventory – Opening Inventor
PROFIT =
SALES – COST OF SALES

9. 1. Liquidity = Easy to convert into cash.
2. E.g: Receivables, inventory, deposits in banks and
investment in government security.

10. Accruals concepts: Revenue and costs are accrued (earned or
incurred).
Cash accounting: System of accounting for cost and income on
the cash basis.
Example:
Cash received: RM 50,000
Expenses: RM 40,000
Receivable owing: RM 10,000 (on 30th June)
Owes suppliers: RM 7,000 (good & services received)
Accounting basis and accruals accounting?

11. Cash accounting basis
Net Profit = Cash Sales – Cash Expenses
= RM 50,000 – RM 40,000
= RM 10,000
Accruals accounting basis
Net Profit = Cash Sales + Receivables Owing – Cash
Expenses –
(Expenses – Receivables Owing + Good
and Services
Received)
= RM 50,000 + RM 10,000 – (RM 40,000 – RM
10,000 + RM 7,000)
= RM 13,000

12. Accruals or matching concept require:
• Revenue and cost earned and incurred
• Matched and with related period
• Dealt in income statement & irrespective receive of
payment with related period.

13. Sales made in 16 December 2011
RM
8,000
Money received from customer 21 January 2012
RM
8,000
Cost of goods sold
RM 6,600
So, what we should extract in income statement for the
year ended 31 December 2011?

14. Briefly explain what is:
1. Accruals
2. Prepayment