How to Calculate Net Change in Cash From a Cash Flow Statement
Original post by Matt McGew of Demand Media
Generally accepted accounting principles (GAAP) require accountants to list the net change in cash flow at the end of a company's cash flow statement. When preparing this cash flow statement, you can manually calculate the net change in cash flow by comparing the difference between cash and cash equivalents at the beginning and end of the accounting year.
Determine the cash and cash equivalent figure from the previous accounting year. You can find this information on the company's previous year cash flow statement. For example, assume the previous year's cash and cash equivalent figure was $50,0000.
Determine the cash and cash equivalent figure for the current year. Add all of the individual cash and cash equivalent figures on the company's cash flow statement to determine the current year's figure. For example, assume the cash and cash flow equivalent figure for the current year is $30,000.
Subtract the previous year's cash and cash equivalent figure from the current year's cash and cash equivalent figure. Continuing the same example, $30,000 - $50,000 = ($20,000). This figure represents the net change in cash flow figure that will appear at the end of the company's cash flow statement. Since this calculation resulted in a negative number, the accountant would put parentheses around the number on the cash flow statement to indicate a negative number or negative net change.
- "Principles of Accounting"; Belverd Needles et al; 2010
About the Author
Since 1992 Matt McGew has provided content for on and offline businesses and publications. Previous work has appeared in the "Los Angeles Times," Travelocity and "GQ Magazine." McGew specializes in search engine optimization and has a Master of Arts in journalism from New York University.