CASH FLOW STATEMENT
1. Meaning of Cash Flow Statement
 Cash flow statement is an additional information to the users of f...
5. Classification of cash flows
 Operating activities are the principal revenue-producing activities of the enterprise an...
Cash Flow Statement under Direct Method
Cash flow statement
Rs. Rs.
Opening Balance of Cash and Cash Equivalents
Cash Flow...
Cash flows statement under Indirect method
Rs. Rs.
Opening Balance of Cash and Cash Equivalents XXX
Profit and loss for th...
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Cash flow statement

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Cash flow statement

  1. 1. CASH FLOW STATEMENT 1. Meaning of Cash Flow Statement  Cash flow statement is an additional information to the users of financial statements  This statement exhibits the flow of incoming and outgoing cash  In short, cash flow statement exhibits the source of cash and application of cash 2. Objectives of Cash Flow Statement  Balance sheet statement provides the information of financial position of an entity as on a particular date only  Cash flow statement analyses flow of cash between two periods of time  It helps to identify the historical changes in the flow of cash & cash equivalents  It helps to determine the future requirement of cash & cash equivalents  This statement assesses the ability of the enterprise to generate cash and cash equivalents  It also assesses the liquidity and solvency of the enterprise 3. Definitions  Cash comprises of cash in hand and demand deposits with banks  Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value  Cash flows are inflows and outflows of cash and cash equivalents.Cash flows exclude Movements between cash and cash equivalents 4. Format of a Cash Flow Statement Cash Flow Statement for the year ended 31-03-20XX (a) Cash and cash equivalents at the beginning of the period (b) Cash flows from operating activities XXXX XXXX (c) Cash flows from investing activities XXXX (d) Cash flows from financing activities XXXX (e) Cash and cash equivalents at the end of the period = a+b+c+d XXXX
  2. 2. 5. Classification of cash flows  Operating activities are the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities. Examples: o Cash receipts from sale of goods / rendering services o Cash receipts from royalties, fees, commissions and other revenue o Cash payments to suppliers of goods and service  Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Examples o Cash payments to acquire fixed assets o Cash receipts from disposal of fixed assets o Cash payments to acquire shares, warrants or debt instruments of other enterprises and interest in joint ventures  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. o Issue of share o Buy back of shares o Redemption of preference shares o Issue / redemption of debentures o Long term loan / payment thereof Net cash flow from Operating Activities Investing ActivitiesFinancing Activities
  3. 3. Cash Flow Statement under Direct Method Cash flow statement Rs. Rs. Opening Balance of Cash and Cash Equivalents Cash Flow from Operating Activities XXX Cash received from sale of goods XXX Cash received from debtors XXX Cash received from sale of services XXX XXX Less Payment for cash purchases (XXX) Payment to creditors (XXX) Payment for operating expense (XXX) (Eg: power, rent etc) Payment for wages and salaries (XXX) Payment of income tax (XXX) (XXX) Net cash flow from operating activities XXX Cash Flow from Investing Activities Purchase of Fixed Assets Sale of Fixed Assets Purchase of shares/ debentures Sale of shares/ debentures Net Cash flow from Investing Activities Cash Flow from Financing Activities Cash from issue of shares and debentures Repayment of loan Repayment of debentures Dividends Paid Interest Paid Net Cash flow from Financing Activities Closing Balance of Cash and Cash Equivalents (XXX) XXX (XXX) XXX XXX (XXX) (XXX) (XXX) (XXX) XXX XXX XXX
  4. 4. Cash flows statement under Indirect method Rs. Rs. Opening Balance of Cash and Cash Equivalents XXX Profit and loss for the period as per P&L A/c XXX Adjustments for non cash & items considered under other heads Add: Provisions created Depreciation Dividends paid XXX XXX XXX Effects for changes in working capital (Current Assets, Current Liabilities) XXX Net cash flow from operating activities XXX Cash Flow from Investing Activities Purchase of Fixed Assets Sale of Fixed Assets Purchase of shares/ debentures Sale of shares/ debentures Net Cash flow from Investing Activities Cash Flow from Financing Activities Cash from issue of shares and debentures Repayment of loan Repayment of debentures Dividends Paid Interest Paid Net Cash flow from Financing Activities Closing Balance of Cash and Cash Equivalents (XXX) XXX (XXX) XXX XXX (XXX) (XXX) (XXX) (XXX) XXX XXX XXX

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