To get the closing balance of cash, following steps are required to be taken to get the solution.

  • Knowing cash from operation
  • Knowing cash from investment
  • Knowing cash from financing

When these 3 steps are combined with cash from opening balance, you can get the result of closing balance of cash.

Knowing cash from operation

This step depicts that what is the net profit amount in a business operation in cash form.

  1. To a given net profit, add up non-operating losses and expenses as well as non-cash.
  2. When you get a balance after addition on above step, subtract non-operating incomes and non-cash from it.
  3. After you have compared the figures of two consecutive years, put together (add) the result which you will get combining the increase in current liabilities and a decrease in current
  4. When this step gets completed, take off the sum of decrease in current liabilities and increase in current assets.
  5. Following the above steps, subtract paid income tax from the remaining balance.

Knowing cash from investment

This step shows the comparison of investing activities between inflow of cash and outflow of cash.

Inside currency inflow, you have to see following things,

  • Gain of interest
  • Gain of dividend
  • Transaction of fixed assets

When outflow of money is low, you have to take into account cost of fixed assets investment.

Knowing cash from financing

This step involves a comparison between inflow of money and outflow of money from financing activities.

In cash inflow, look for:

  • Debentures that have been newly issued
  • Shares that have been newly issued

In cash outflow,

  • Dividend Payment
  • Debentures Retrieval
  • Interest Payment
  • Shares Retrieval

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