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ACCA Applied Skills · Financial Management · Management of inventories, accounts receivable, accounts payable and cash

Which of the following is a typical feature of a cash flow forecast prepared by a company?

A cash flow forecast shows only expected cash receipts and payments in the period when the cash actually moves. Non-cash items such as depreciation are excluded, credit sales appear when collected, and capital expenditure is included as a cash outflow.

  1. AIt includes depreciation as an outflow in the month it is charged
  2. BIt shows only cash receipts and payments in the period they are expected to occurCorrect
  3. CIt includes credit sales in the month the sale is made
  4. DIt excludes capital expenditure because it is not part of operating activity

Explanation

A cash flow forecast records cash receipts and payments when they are expected to occur. Depreciation is non-cash, so option 0 is wrong. Credit sales are included when the cash is received, not when sold, so option 2 is wrong. Capital expenditure is a cash outflow and is included, so option 3 is wrong.

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