Cash Flow(Basics)

Cash management is usually done on the basis of cash inflow and cash outflow. The cash receipts and cash expenditure are reflected in a statement called “cash flow statement”. This statement can be prepared at a predetermined frequency, say every day, every week, every fortnight or every month. Usually it is not prepared at a frequency, which is less than a month. It has revenue receipts, revenue expenditure, capital receipts and capital expenditure unlike profit and loss account, which has only revenue items of income and expenditure. The details of revenue receipts/revenue expenditure and cash receipts/cash expenditure are given in the following points:


Revenue Receipt – Receipt from operations unlike capital receipt like sale of a capital equipment etc. Usually a period of 12 months is taken as the period in which revenue receipt should occur.

Revenue Expenditure – Expenditure for operations unlike capital expenditure like purchase of machinery etc. Usually a period of 12 months is taken as the period in which revenue expenditure should occur.

Capital Receipt – Receipt from owner in the form of capital or loans from lenders which need not be repaid within 12 months. Generally all sources, which go in for purchase of capital assets, are called capital receipts.

Capital Expenditure – Expenditure towards purchase of capital assets or repayment of an earlier capital receipt.