ACCOUNTING STANDARD - 3CASH FLOW STATEMENT Presented By Group 3: Anshul Jain Amrita Menachery Dolly Rathode Ashay Deshmukh Khan Fazal Ahmed Pradeep S. VLN Mayank Jain
INTRODUCTION Accounting Standard (AS) 3, ‘Cash Flow Statements’ (revised 1997), issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of accounting periods commencing on or after 1-4-1997. This Standard supersedes Accounting Standard (AS) 3, ‘Changes in Financial Position’, issued in June 1981. Net Cash Flow = Cash Inflows - Cash Outflows
Definition A cash flow statement showing inflows(Receipts) and outflows(Payments) of Cash during a particular period. This statement includes only those items which effects cash.
Objectives 1.Useful for short-term Financial planning:- A cash-flow statement provides for planning the short-term financial needs of the firm 2.Useful in preparing the cash budgets:- A cash flow statement prepared for future period is helpful in preparing a cash budgets 3.Comparison with the cash budget:- A cash budget is prepared at the commencement of the year,where as a cash flows is prepared at the end of the year
4.Study of the trend of cash receipts and payments: A cash-flow statement reveals the speed at which the cash is being generated from debtors, stocks and current asset. 5. Helpful in ascertaining cash flow from various activities separately. 6. Helpful in making dividend decisions.
Types Of Methods It can be derived either from direct method or indirect method Direct method : In this method, gross receipts and gross payments of cash are disclosed Indirect method : In this method, profit and loss account is adjusted for the effects of transaction of non-cash nature.
Different types of Activities Operating activities : are the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities. Investing activities : are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities : are activities that result in changes in the size and composition of the owners’ capital (including preference share capital in the case of a company) and borrowings of the enterprise.
Cash flow Statement
Net Inc./Dec. in Cash & Cash Equivalent (A+B+C) …XXX… Cash & Cash Equivalent at the beg. of the period …XXX... Cash & Cash Equivalent at the End of the Period …XXX………
To assess the ability of the enterprise to generate cash and cash equivalents.
Taking economic decisions by users require an evaluation of the ability of an enterprise.
Deals with the provision of information about the historical changes in cash.
Limitations Prepared on principle of cash basis: Revenue earned by selling goods on credit is ignored. 2. Ignores non-cash charges 3. Possibility of window dressing is higher