Management Accounting Meaning, Definition and Cash Flow Statement

1. MANAGEMENT
ACCOUNTING

2. INDEX • MANAGEMENT ACCOUNTING
• DEFINITION OF MANAGEMENT ACCOUNTS
• CASH FLOW STATEMENT
• DEFINITION OF CASH FLOW STATEMENT
• OBJECTIVES OF CASH FLOW STATEMENT
• ADVANTGES OF CAHS FLOW STATEMENT
• DISADVANTAGES OF CASH FLOW
STATEMENT
• FORMATE OF CASH FLOW STATEMENT

3. MANAGEMENT ACCOUNTING
 Management accounting is the presentation of analysis of
business activities to the Internal management to facilitate
decision making.

4. DEFINITION
The Institute of Cost and Management
Accountants, London, has defined
management accounting as: “ The
application of professional knowledge and
skill in the preparation of accounting
information in such a way as to assist
management in the formation pf policies
and in the planning and control of the
operation of the undertakings.

5. CASH FLOW STATEMENT
 In financial accounting, a cash flow
statement, also known as statement of
cash flow.
 A financial statement that shows how
changes in balance sheet accounts and
income affect cash and cash equivalents,
and breaks analysis down to operating,
investing, and financing activities.
 Essentially the cash flow statement is
concerned with the flow of cash in and out
of the business.
DEFINITION
 According to Khan and Jain:
“ Cash Flow statement are statement of
charges in financial position prepared on
the basis of funds defined a cash or cash
equivalent.”

6. CLASSIFICATION

7. ACTIVITIES OF CASH FLOW
STATEMENT
OPERATING
• Operating activities include the
production, sales and delivery
of the company’s product as
well as collecting payment from
its customers.
• Under IAS 7, operating
cash flows includes:
• Interest received on loans.
• Payments to suppliers for
goods and services.
• Payment to employees or on
behalf of employees.
• Buying Merchandise.
• Dividends received general
reserves.
INVESTING
• Purchase or sales of an asset
( asset can be land, building,
equipment, marketable
securities, etc.)
• Loans made to suppliers or
received from customers
• Payment related to mergers
and acquisition.
FINANCING
• Financing activities include the
inflow of cash from investors such
as banks and shareholders, as well
as the outflow of cash to
shareholders as dividend as the
company generates income.
• Under IAS 7, Financing cash
flow includes:
• Payments of dividend.
• Payment for repurchase of
company shares.
• Dividend paid.
• Sale or repurchase of the
company’s stock.

8. OBJECTIVES
 The main objective of preparing cash flow
statement for a particular accounting period is
to present information regarding inflow and
outflow of cash.
 It present the investment and financial
activities of a concern for a particular period.
 Ensuring that positive cash flow of particular
concern.
 Ensuring capacity of an organization to pay
dividend.
 Identifying non-cash items ensuring cash
income and expenses of a concern.
 Comparing cash and cash equivalent items of
the current year with those last year.
 Knowing cash and cash equivalent and
outsources inflow of concern for a particular
period.
 It also help shareholders and potential
investors in taking short-term and long-term
decisions.

9. IMPORTANCE OF
CASH FLOW
STATEMENT
 IMPORTANCE:
 Helps to make cash forecast
 Helps the internal management
 Reveals the cash position
 Reveals the result of Cash Planing
 It helps the financial manager to make
cash flow projection for immediate
future taking the data relating to cash
from the past records.
 However, Cash Flow Statement is an
important financial tool for thr
management to make an estimate
relating to cash for the near future.

10. ADVANTAGES
 Ascertaining Liquidity and Profitability Positions
 Ascertaining optimum Cash Balance
 Cash Management
 Capital Budgeting Decisions
 Planning and Coordination
 Movement of Cash
 Performance Appraisal

11. DISADVANTAGES
• Since it shows only Cash position, it is not possible to arrive at
actual profit and loss of the company by just looking at this
statement alone.
• In isolation this is of no use and it requires other financial
statements like balance sheet, profit and loss etc., and therefore
limiting its use.

12. FORMAT OF CASH FLOW
STATEMENT

13. THANK YOU
 By KRISHNAMOORTHYD & SATHISHKUMART M