Module 7 · Advanced · 10 min read

Cash flow, liquidity and year-end basics

You will be able to: Read the indirect Cash Flow report and check that it ties to the bank; Use Cash and Liquidity to look ahead 90 days; Describe what Fiscal Years and Year-End Close do.

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Profit is not cash. A profitable month can still end with an empty bank account if customers have not paid or stock was bought. The cash flow statement explains the gap, and the liquidity view looks forward.

The Cash Flow report

Zeyto's Cash Flow report uses the indirect method. It starts from Net income and adds a Change in line for each balance that moved: a balance you are owed or hold (receivables, stock) that grew used cash, a balance you owe that grew brought cash in, and depreciation is added back. Then come investing (fixed asset additions or disposals) and financing (capital introduced or withdrawn). The Direct method is not available yet: choosing it still shows the indirect one.

From profit to cash (AED), using lesson 6Net income 80,100. Add back depreciation 900 = 81,000. Receivables up 45,000, inventory up 30,000, prepaid up 22,000 and VAT input up 3,000 used 100,000 of cash: 81,000 - 100,000 = -19,000. Payables up 28,000, VAT output 6,000 and accrued expenses 5,000 brought in 39,000: -19,000 + 39,000 = 20,000. Operating cash flow = 20,000. Investing: the van, -60,000. Financing: share capital, +100,000. Net change in cash = 20,000 - 60,000 + 100,000 = 60,000, which equals the cash and bank balance in the Trial Balance for a first period that starts from zero.

The Summary at the end shows Net change in cash and Actual cash movement (Cash + Bank). They must be equal. If they are not, Zeyto shows the gap in a banner and in the Unreconciled difference tile; take it to your accountant before you rely on the statement.

Cash and Liquidity

Under Dashboards, Business Overview, More views, or from the Reports home, Cash and Liquidity answers whether you will run short. It shows Cash and bank, Money in, Money out, Net movement and Runway, a chart, post-dated cheques due in 30 days, and a 90-day forecast of closing cash with the lowest point and its date. The forecast counts only what is already booked: invoices and bills on their due dates, cheques on their dates and approved payroll not yet paid. Overdue customer money is not counted because nobody knows when it will arrive. Confidence is High, Medium or Low. It is a picture of commitments, not a prediction of sales.

Year-end basics

Settings, Fiscal Years: Zeyto refuses documents dated outside an open fiscal year. Add next year before it begins. Setting a year to Closed stops postings dated inside it. Closing there posts nothing and moves no balances.
Accounting, Year-End Close: the income and expense accounts are closed into one retained earnings account (an equity account you choose). Zeyto posts one closing voucher per branch, dated the last day of the year, then locks the year. You see exactly what will be posted first.
A year can be closed only after the year before it is closed. A close can be reversed with a reason of at least 5 characters, unless a later year is closed.
Profit and loss reports leave the closing vouchers out, so a closed year still shows its income and expense. The Trial Balance and Balance Sheet include them. The Cash Flow ignores them because closing moves no cash.

The Year-End Close screen with the financial year, the retained earnings account and the Close button. — Accounting, Year-End Close: the profit moves into retained earnings.

A closing entryA year has income of AED 2,000,000 and expenses of AED 1,590,000. The closing voucher debits each income account and credits each expense account until they reach zero, and credits Retained Earnings with the net profit: 2,000,000 - 1,590,000 = AED 410,000.

Watch outFinish depreciation, accruals and prepayments for all twelve months and post the final adjustments before you close. Drafts open in the year are not part of the close, so submit or delete them first.

Try it in the demo

Open the Cash Flow report from the Reports search. Pick last month and press Run. Do Net change in cash and Actual cash movement agree?
Open Cash and Liquidity (Business Overview, More views). Read What stands out and the 90-day forecast. What is the Confidence?
Open Settings, Fiscal Years and read the Status of each year. Do not change any status.
Open Accounting, Year-End Close and read the Status and Net Result columns.

Open the live demo

Public demo company, sign in as admin / demoAdmin123. Data refreshes nightly.

Key takeaways

Profit is not cash; the indirect Cash Flow report explains the difference and must tie to Cash + Bank.
Cash and Liquidity forecasts 90 days from booked items only and states its confidence.
Year-End Close moves the year's profit into retained earnings with one voucher per branch and locks the year.
Close a year only after all adjustments are posted and earlier years are closed.

Check yourself

5 questions on this lesson. Not timed, not the exam, and you can try again. Score 60% or more, and read the lesson, to complete it.

1. Which method does Zeyto's Cash Flow report use?

2. Net income 50,000; depreciation 4,000; receivables up 12,000; payables up 7,000; fixed assets bought 30,000; capital introduced 20,000. What is the net change in cash?

3. Which statements about Year-End Close are true?

Select all that apply.

4. A year has income of AED 900,000 and expenses of AED 745,000. What does the closing voucher do to Retained Earnings?

5. The Cash and Liquidity 90-day forecast counts overdue customer invoices as money arriving tomorrow.

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Practice questions for this module · Printable study sheet