Opening and Closing Balances Flashcards

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  • Look through all the flashcards to see what's on both sides.
  • Make sure you understand the information on each card. If something's unclear, click the link to the revision notes at the bottom of the page for more details.

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Note: We may include questions that have multiple correct answers. It's useful to remember specific examples to understand these concepts better.

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What is an opening balance in a cash flow forecast?

The cash a business has at the start of the period, like the first day of the month.

What is a closing balance in a cash flow forecast?

The cash left at the end of the period after all inflows and outflows.

How do you work out net cash flow?

Net cash flow is cash inflows minus cash outflows.

How do you calculate the closing balance?

Closing balance = opening balance + net cash flow.

What becomes the opening balance for the next month?

The previous month’s closing balance.

Where are opening and closing balances shown in a cash flow forecast?

Opening balance is at the top of each period’s column, and closing balance is at the bottom.

If the opening balance is £2,000, inflows are £1,500 and outflows are £1,800, what is the closing balance?

Net cash flow is -£300, so the closing balance is £1,700.

If the opening balance is £800 and net cash flow is +£250, what is the closing balance?

£1,050.

What does a negative closing balance mean?

Cash is below zero at the end of the period, so the business cannot pay all bills from cash.

Does the opening balance include money customers still owe?

No. It only includes actual cash in hand and in the bank at the start.