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Cash flow statement
Accountancy
Can we consider Trade receivables while computing cash flow?
Answers (3)
Jitendra Kumar
Yes. If trade receivable increased means cash is not received so we should deduct it from cash flow from operating activities and vise versa.
You means to say if trade receivable increase means our debtor increase It will not give us cash suddenly then how can we consider it in cash flow.
This is covered in detail in class. The linkage between netprofit and working capital changes. We start with net profit. Net profit is computed on accrual basis. So there are some income which are considered for which cash would not have been received by the entity. Hence working capital adjustments are made. Since we did not receive amounts from debtors, it is reduced from the net profit to arrive at cash flow. For assets consider Opening - Closing For liabilities consider closing - opening.
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