Reporting your inventories on statement of cash flows is virtually always done under operating activities cash flows. When you think about it, what are operating cash flows in essence? They\u2019re meant to show the flows your business is able to generate from its operations, from its day-to-day activities. So it\u2019s safe to say that inventories are something that fall under this category pretty clearly.\u00a0<\/p>\n
How exactly however would you display the inventories on the statement of cash flows? In fact there are 3 lines inventories are run through (in case of indirect method for showing cash flows from operating activities) \u2013\u00a0operating profit\u00a0<\/em>and\u00a0change in inventories.\u00a0<\/em>First and foremost they run through operating profit itself. Operating profit sums up from revenues, from cost of goods sold and from other operating expenses. The outflows for goods you\u2019ve bought and already sold are shown through the result of the operating profit. For the inventories shown still on the balance sheet, with the indirect method you display the\u00a0change in inventories<\/em>\u00a0to show whether during the reporting period you\u2019ve paid for inventories more or less as compared to what you already showed under\u00a0operating profit.\u00a0<\/em>It\u2019s called an adjustment to the operating profit and it\u2019s purpose is to show how much of the inventories that you paid for already during the prior reporting period you sold during this year and how many of the inventories you paid for are still in stock. For an instance, let\u2019s presume that our beginning stock level was a 100 and now it\u2019s 150. During our reporting period we sold goods worth of a 1,000. Essentially, from the total 1,000 sold we had in stock a 100 so it means we bought during the reporting period 1,050 (900 + 150).\u00a0\u00a0Our cash flows should display a total of 1,050 of an outflow. From this 1,050 we show under\u00a0operating profit\u00a0<\/em>a 1,000 as mentioned above and the rest is shown under\u00a0change in inventories\u00a0<\/em>by deducting from the brought forward balance of a 100 the carried forward to the next period, a 150 thus reaching an outflow of 50.<\/p>\n To get the cash flows correct, always think how the money moved.<\/p>\n","protected":false},"excerpt":{"rendered":" Reporting your inventories on statement of cash flows is virtually always done under operating activities cash flows. When you think about it, what are operating cash flows in essence? They\u2019re meant to show the flows your business is able to generate from its operations, from its day-to-day activities. So it\u2019s safe to say that inventories […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-5037","post","type-post","status-publish","format-standard","hentry","category-1-3-inventory"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5037","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=5037"}],"version-history":[{"count":1,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5037\/revisions"}],"predecessor-version":[{"id":5038,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5037\/revisions\/5038"}],"wp:attachment":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=5037"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=5037"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=5037"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}