From a trial balance
Trial balance to cash flow statement
A cash flow statement needs two trial balances, not one: the start and the end of the period. Start from the profit, add back depreciation, take out the changes in stock, debtors and creditors, then add what was spent on assets and the borrowing raised or repaid. The total is the change in the bank balance, which proves the statement is complete.
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Every figure shown here is invented for illustration. Nothing on this page is computed from anyone’s accounts.
The workshop's year in cash: £18,300 more in the bank
The invented furniture workshop's balances at the start and end of its year:
| Balance | 31 March 2025 (£) | 31 March 2026 (£) |
|---|---|---|
| Plant and machinery, at cost | 70,000 | 84,000 |
| Accumulated depreciation | 18,000 | 30,000 |
| Stock | 27,000 | 31,200 |
| Trade debtors | 39,800 | 46,500 |
| Bank | 600 | 18,900 |
| Trade creditors | 24,100 | 27,400 |
| VAT payable | 8,300 | 9,100 |
| Bank loan | 30,000 | 25,000 |
And the year's cash flow, by the indirect method:
| Cash flow, year to 31 March 2026 | £ |
|---|---|
| Profit before tax | 32,100 |
| Add back depreciation | 12,000 |
| Increase in stock | (4,200) |
| Increase in trade debtors | (6,700) |
| Increase in trade creditors | 3,300 |
| Increase in VAT payable | 800 |
| Cash from operating activities | 37,300 |
| Plant and machinery bought | (14,000) |
| Cash used in investing activities | (14,000) |
| Bank loan repaid | (5,000) |
| Cash used in financing activities | (5,000) |
| Increase in cash | 18,300 |
| Bank at 1 April 2025 | 600 |
| Bank at 31 March 2026 | 18,900 |
Three steps from two trial balances to a cash flow statement
- Start from the profit and add back what cost no cash. Profit for the period from the profit and loss, plus depreciation and amortisation.
- Turn each balance sheet change into cash. More stock or debtors used cash, so subtract the increase; more creditors or tax owed kept cash in the business, so add it.
- Sort the rest into investing and financing, then check. Assets bought or sold under investing; loans raised or repaid, capital and dividends under financing. Opening cash plus the three sections must equal closing cash exactly.
Why £32,100 of profit became £18,300 of cash
- Working capital took £6,800. Stock and debtors grew by £10,900, creditors and VAT by £4,100.
- New plant took £14,000, against £12,000 of depreciation charged in the profit.
- The bank loan took £5,000 in repayments, which no profit and loss shows.
A board reading the profit alone would expect the bank to be £32,100 better off. The cash flow says where the other £13,800 went.
A cash flow that needs a balancing figure is missing a line
If opening cash plus the three sections does not land on closing cash, a balance sheet line changed and nothing in the statement picked it up: a new account, an accrual, a director's loan. Every balance sheet line has to land in exactly one section. A plug figure labelled "other" hides the mistake rather than finding it.
Magic MIS writes the cash flow statement from your trial balances every month
The workbook holds a cash flow statement for every month, by the indirect method, built from the books' own movements: from the month before, or for the first month loaded, from the opening balances the trial balance reports. Every line is profit, depreciation or a balance sheet change with its sign turned, the three sections add up to the change in cash and bank, and nothing on the sheet is a balancing figure. Interest stays where the books put it, inside profit. After the first upload, each month's trial balance is enough, because the month before is already there. Prepaid credits, no subscription, and every action shows its price before it runs: see the credit packs.
What people ask about a cash flow statement from a trial balance
Can you prepare a cash flow statement from a trial balance?
Yes, from two: the trial balances at the start and the end of the period. One trial balance has no movements to work from.
Should I use the direct or the indirect method?
The indirect method starts from profit and adjusts it, and a trial balance gives you everything it needs. The direct method lists cash received and paid, and needs the cash book.
Where does interest go?
If the profit and loss deducted it, it is already inside the profit the statement starts from. Some frameworks show interest paid as a line of its own under operating or financing; say which you did and keep to it.
Why doesn't my cash flow statement balance?
A balance sheet line changed and no line in the statement picked it up. List every balance sheet line and tick off where each one landed.
Read next
- Trial balance to balance sheet: three steps and a worked exampleHow to turn a trial balance into a balance sheet: split the accounts, group them into lines and carry the year's profit into reserves, with a worked example that balances.Read
- How do you calculate net burn?Net burn is the cash a business used in the month, with financing taken out. The formula, gross burn beside it, a worked example, and where the figures come from.Read
- How do you calculate cash runway?Cash runway = cash at the month end ÷ the average monthly net burn of the last three months. The formula, a worked example, and why three months beats one.Read
Have a cash flow statement that adds up, built from your trial balances
Create an account, load last month's trial balance, and get the report — paid per action.
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