The next section of our Cash Flow Statement covers Cash Flows from Investing Activities.
Row R11 Purchases of Fixed Assets sums the Net Changes in Balance Sheet accounts 16210, 17110, and 18110 for Increases during the Year of vehicles, operating equipment, and buildings. Purchases of Fixed Assets cause a debit balance on the Balance Sheet accounts but represent cash outflows, so we have to subtract the increase. This adjustment assumes all Fixed Asset purchases were paid with cash.
Row R12 Proceeds from the Sale of Fixed Assets sums up the Net Changes in Balance Sheet accounts 16220, 17120, and 18120 for Decreases during the Year of vehicles, operating equipment, and buildings. The assumption that the decrease in Fixed Asset value represents the cash inflow we need to report will almost never hold.
In order to have an example to look at, I posted the sale of a not fully depreciated Fixed Asset. G/L Account 16220 shows a negative $-26,900.07, and this is the amount we will report in Row R12 as cash inflow:
When you look at the G/L Entries posted with the sales order, you can see the vehicle was sold for $19,000.00:
The $3,136.00 debit to G/L Account 16300 Accum. Depreciation, Vehicles reverses the previously posted monthly depreciations. This amount is already reported in Row R02 Add Depreciation Expense in the Operating section of our Cash Flow Statement.
Because the vehicle was sold for less than its book value, the company realized a loss of $4,764.07, debited to G/L Account 81200 Gains and Losses.
A look at the applied Customer Ledger Entry to the sales order shows cash was collected in the same period. This means we need to record a cash inflow of $19,000.00 instead of the $26,900.07 reported in Row R12. The problem is there is really no way to report this adjustment by summing up G/L Accounts.
Using a Cash Flow Forecast to report Cash Flow Statement Adjustments
Please take a look at Row R13 Correction Proceeds on Disposal. Field Totaling Type contains the value Cash Flow Entry Accounts. What we do here is to report a value in our Cash Flow Statement that is not a G/L Entry.
With version Dynamics NAV 2013, Microsoft introduced a new functionality called Cash Flow Forecast. This Cash Flow Forecast is a planning tool. You use this planning tool to register estimated future cash movements in Cash Flow Forecast Entries. Based on the daily balances of those Cash Flow Forecast Entries you can design reports showing your expected future daily cash positions.
The Cash Flow Forecast tool has absolutely nothing to do with Cash Flow Statements. What we have done was to take advantage of the fact that Cash Flow Forecast Entries can be reported on in Account Schedules, right next to G/L Entries. Microsoft's intention was to give you the ability to design reports in Account Schedules that compare Cash Flow Forecast Entries to G/L Entries, so you can see how accurate your Cash Flow Forecast was.
Chart of Cash Flow Accounts and Cash Flow Forecast Card
Cash Flow Forecast Entries are organized in Cash Flow Forecasts that use the structure of a Chart of Cash Flow Accounts. The below picture shows the Chart of Cash Flow Accounts Microsoft entered into the CRONUS USA, Inc. demo company:
You can see I added a new Account 0051 Fixed Asset Disposal Correction.
There is only one Chart of Cash Flow Accounts, but you can add an unlimited number of Cash Flow Forecasts. Below is the picture of Cash Flow Forecast Card CF100002:
I added Cash Flow Forecast CF100002 for the sole purpose of recording Balance Sheet adjustments for the preparation of a Cash Flow Statement. While all other Cash Flow Forecasts can be used for forcasts and analytical purposes, CF100002 must not cary any entries other than those needed to adjust Balance Sheet positions for the Cash Flow Statement.
Cash Flow Forecast Entries
I registered a single Manual Expense Entry for $-4,764.07
This single Entry is reported in Row R13 Correction Proceeds on Disposal.
Final Report: Net Cash Flow from Investing Activities
Author: Thomas Paulsen