How to Prepare a Personal Cashflow Statement (Income & Expenditure Statement)

A Personal cashflow statement, also known as a personal income and expenditure statement, is a summary of cash receipts and payments for a given period, such as a month or a year. This report provides data on income and spending patterns, which is handy when preparing a budget.

Step 1: Record your Income (Inflows)

The first component of a cashflow statement is the cash received during the time period involved. For most people, the main source of income is money received from job. Other common income sources include wages, salaries, commissions, Self-employment business income etc

Step 2: Record Cash Expenditures (Outflows)

Cash payments for living expenses and other items make up the second component of cash flow statement. The use of a cheque book or some other recordkeeping system is necessary for an accurate total of cash expenditures.

Step 3: Determine Net Cash Flow

The difference between income and expenditures can be a positive (surplus) or a negative (deficit) cash flow. A deficit exists if more cash goes out than comes in during a given month. When you have a cash surplus, this amount is available for saving, investing, or paying off debts.

A Cashflow statement therefore provides the foundation for preparing and implementing a spending, saving, and investment plan.

Relationship between the Personal Balance Sheet and the Personal Cashflow Statement

Changes in net worth are the result of the relationship between income and expenditures.

  • When expenditure exceeds income, you must draw on savings or borrow (buy on credit). This results in lower assets (savings) or higher liabilities (due to the use of credit).
  • When income exceeds expenditure, putting money into savings or paying off debts will result in a higher net worth.

Since you have your two personal financial statements, you can now analyze your Financial Health.

Tools to Use

1. Financial Planning Worksheet: Download, print and use. (pdf file)

2. Personal Cashflow Statement Worksheet: Use this worksheet to prepare a personal/household cashflow statement. (zip file)

When you are through, proceed to determining what's important to you and setting up your financial goals.

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