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Cash Flow Statement
Presentation By:
• Ahmed Muhammad Masood Niazi straight from
Mianwali
• Saqib Tariq CHAUDHRY from Muni...
Statement of Cash Flow
• Provides information about cash inflows and outflows during
an accounting period.
• Focuses on Ca...
Statement of Cash Flow
• While developing cash flow statement we need information from
balance sheet and income statement
...
Statement of Cash Flow
• Remember: Cash is on the left hand side of the Balance Sheet
• Assets = Liabilities + Equity
• Mo...
Methods of Preparing Cash
Flow Statement
There are two methods by which we can prepare
cash flow statement:
• Direct Metho...
Direct Method:
• very simple and result is more easily understood
• In this method you are analyzing or evaluating your
ca...
Indirect Method:
• frequently used and most common method.
• less expensive to use.
• In this method you start with net in...
Indirect vs Direct
• The main difference between the direct method
and the indirect method is involvement of
the cash flow...
CF from Operating Activities
Start with the net profit (income) and “modify” until you get the
net cash flow
As Depreciati...
Example
Net Profit 50000
Add
Depreciation 8000
Decrease in a/c receivables 5000
Less
Decrease in a/c payables (2000)
Loss ...
Operating cash flows include:
• Receipts from the sale of goods or services
• Receipts for the sale of loans, debt or equi...
Items which are added back to [or subtracted from, as
appropriate] the net income are:
• Depreciation (loss of tangible as...
CF from Investing
Activities
Buying or selling productive long-lived assets such as plants and
equipment
Zero (starting po...
Example
Cash flow from operations 60000
Cash flow from investing activities
Cash from sale of Mkt. Securities 5000
Cash ad...
Investing activities include:
• Purchase or Sale of an asset (assets can be land,
building, equipment, marketable securiti...
CF from Investing
Activities
• While preparing CF from Investing Activities we are looking
for changes in Gross Fixed Asse...
CF from Financing
Activities
• Financing Activities
This includes transactions related:
New loans (long-term, short-term d...
Example
Cash flow from investing activities 70000
Cash flow from financing activities
Proceeds from sale of shares 8000
Di...
Statement of Cash flows:
Useful Relation
Net cash flow from Operating Activities
+ Net cash flow from Investing Activities...
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Accounting Project Presentation - Cash Flow Statement.

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Accounting project presentation explaining cash flow statement in Financial accounting

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Accounting Project Presentation - Cash Flow Statement.

  1. 1. Cash Flow Statement Presentation By: • Ahmed Muhammad Masood Niazi straight from Mianwali • Saqib Tariq CHAUDHRY from Muniawala • Saad Javed Satti from Kotli Sattiyan • Mirza Umer Baig from Jeddah` • Mian Haider Ali Shah from AKORA khattak • Ayaz Tariq from MK
  2. 2. Statement of Cash Flow • Provides information about cash inflows and outflows during an accounting period. • Focuses on Cash • Three sections to the statement of cash Flows: 1. Cash flow from Operating Activities 2. Cash flow from Investing Activities 3. Cash flow from Financing Activities
  3. 3. Statement of Cash Flow • While developing cash flow statement we need information from balance sheet and income statement • All items are classified as either cash inflows or cash outflows If an item represents a cash INFLOW  you ADD that item If an item represents a cash OUTFLOW  you SUBTRACT that item
  4. 4. Statement of Cash Flow • Remember: Cash is on the left hand side of the Balance Sheet • Assets = Liabilities + Equity • Most classifications (In/outflow) are easy An increase in gross fixed assets An increase of long-term debt Cash inflow =Decrease in Assets or Increase in Liabilities or equity Cash outflow =Increase in Assets or Decrease in Liabilities or equity
  5. 5. Methods of Preparing Cash Flow Statement There are two methods by which we can prepare cash flow statement: • Direct Method • Indirect Method
  6. 6. Direct Method: • very simple and result is more easily understood • In this method you are analyzing or evaluating your cash and bank accounts to identify cash flow during the period.
  7. 7. Indirect Method: • frequently used and most common method. • less expensive to use. • In this method you start with net income per the income statement, reverse out entries to income and expense accounts that do not involve a cash movement
  8. 8. Indirect vs Direct • The main difference between the direct method and the indirect method is involvement of the cash flows from operating activities. • Under the direct method, the cash flows from operating activities will include the amounts for lines such as cash from customers and cash paid to suppliers. • In contrast, the indirect method will show net income followed by the adjustments needed to convert the total net income to the cash amount from operating activities.
  9. 9. CF from Operating Activities Start with the net profit (income) and “modify” until you get the net cash flow As Depreciation is non cash expense and we had subtracted it from the income statement so we will add it back in cash flow statement. Net income from Income Statement (starting point) + Depreciation Changes in Current Assets (Accounts receivable, Inventories) changes in Current Liabilities (Accounts payable, Accruals) = Net cash flow from operating activities
  10. 10. Example Net Profit 50000 Add Depreciation 8000 Decrease in a/c receivables 5000 Less Decrease in a/c payables (2000) Loss on sale of asset (1000) Cash flow from operations 60000
  11. 11. Operating cash flows include: • Receipts from the sale of goods or services • Receipts for the sale of loans, debt or equity instruments in a trading portfolio • Interest received on loans • Payments to suppliers for goods and services. • Payments to employees or on behalf of employees • Interest payments • Buying Merchandise
  12. 12. Items which are added back to [or subtracted from, as appropriate] the net income are: • Depreciation (loss of tangible asset value over time) • Deferred tax • Amortization (loss of intangible asset value over time) • Any gains or losses associated with the sale of a non- current asset, because associated cash flows do not belong in the operating section.(unrealized gains/losses are also added back from the income statement) • Dividends received • Revenue received from certain investing activities
  13. 13. CF from Investing Activities Buying or selling productive long-lived assets such as plants and equipment Zero (starting point) Changes in Gross Fixed Assets = Net cash flow from investing activities
  14. 14. Example Cash flow from operations 60000 Cash flow from investing activities Cash from sale of Mkt. Securities 5000 Cash advanced to borrowers (8000) Cash proceeds from sale of asset 13000 Cash flow from investing activities 70000
  15. 15. Investing activities include: • Purchase or Sale of an asset (assets can be land, building, equipment, marketable securities, etc.) • Loans made to suppliers or received from customers
  16. 16. CF from Investing Activities • While preparing CF from Investing Activities we are looking for changes in Gross Fixed Assets, not Net Fixed Assets! • What if Gross Fixed Assets are not reported in balance sheet? Then we will first Calculate Dep. Then find out Gross fixed Assets Depreciation (on the income statement) = Change in Accumulated Depreciation (on the balance sheet) Change in Gross Fixed Assets = + Change in Net Fixed Assets + Depreciation (on the income statement)
  17. 17. CF from Financing Activities • Financing Activities This includes transactions related: New loans (long-term, short-term debt)/Repayment of principal Sale (issue) or repurchase of stock and Payment of dividends. Zero (starting point) Changes in Notes Payable, Current Portion of LT Debt, Long Term Debt, Common Stock - Dividend Payout (= Net Income – Change in Retained Earnings) = Net cash flow from financing activities
  18. 18. Example Cash flow from investing activities 70000 Cash flow from financing activities Proceeds from sale of shares 8000 Dividend paid (1000) Cash proceeds from N/P 12000 Net Cash flow 89000 Op cash 6000 Closing cash 95000
  19. 19. Statement of Cash flows: Useful Relation Net cash flow from Operating Activities + Net cash flow from Investing Activities + Net cash flow from Financing Activities ________________________________ = CHANGE in the cash account (balance sheet)

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