Presenting sales revenue and receivables on the statement of cash flows

Sales revenue and receivables are balances that are reported on statement of cash flows. They are cash movements (mostly at least) and as such, they are most certainly reflected on the statement, however the question of ‘where’ remains.  

When you think about groups of cash flows on the statement, sales revenue is not an investing or a financing activity, but as sales revenue (and the resulting receivables) is related to your operations, they are shown on the statement of cash flows under ‘cash flows from operating activities’.

As you know, cash flows from operating activities can be presented either by using a direct or indirect method. When applying the first option, the cash flows from sales activities are presented in their total for the reporting period (including sales taxes or VAT since it was the money received). However, when applying the indirect method, sales revenues is part of your operating profit you’d start the statement from and you’d adjust it with ‘change in receivables’ later on the statement.

Note that when you have written down your receivables, they are included in all adjustments as well as the operating profit. You don’t have to exclude a receivables provision from the amount you show on the line ‘change in receivables’.

Presenting sales revenue and receivables on the statement of cash flows is fairly easy and straightforward and at the end of the day the only choice you have to make is whether to show your cash flows from operating activities using a direct or an indirect method.