Cash Flow

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Cash Flow

  1. 1. Cash Flow Cash flow is an accounting term that refers to the amounts of cash being received and spent by a business during a defined period of time, sometimes tied to a specific project.
  2. 2. <ul><li>Difference between Cash </li></ul><ul><li>Flow Statements and Fund </li></ul><ul><li>Flow Statements </li></ul><ul><li>Is change in Working Capital </li></ul><ul><li>means change in Cash </li></ul><ul><li>Inflow and Outflow of Cash </li></ul>
  3. 3. 3 Steps to solve a Question Step 1: Prepare Adjusted Profit And Loss Account and find out Fund From Operation (FFO). Step 2: With the Help of FFO from Adjusted Profit And Loss Account, Calculate Cash From Operation (CFO). Step 3: With the help of CFO, finally calculate Cash Flow Statement (CFS) .
  4. 4. Step 1: Adjusted P/L A/C Take the profit as disclosed by the Profit and Loss A/c -------- Add: Those items that represent mere books entries without any payment or loss of cash, such as depreciation and amortisation of intangible assets (i.e., non-cash charges) and appropriation of profits such as dividend -------- Less: Profit arising out special transactions such as sale of fixed assets or redemption of liability -------- -------- Fund From Operation (FFO) -------- Particulars Amount (Rs.)
  5. 5. Items which are added in the Adjusted P/L a/c are: <ul><li>Depreciation </li></ul><ul><li>Writing off fictitious assets such as Preliminary expenses </li></ul><ul><li>discount on issue of shares and debentures, etc. and </li></ul><ul><li>Intangible assets such as goodwill, patents, trade mark, etc. </li></ul><ul><li>Appropriation of profit such as general reserves, sinking fund, </li></ul><ul><li>etc. </li></ul><ul><li>Dividend on shares </li></ul><ul><li>Loss on sale fixed assets </li></ul><ul><li>“ Loss” or “Premium” on redemption of debentures or shares </li></ul>Items which are deducted from the Adjusted P/L a/c are: <ul><li>Dividend received </li></ul><ul><li>Profit on sale of fixed assets </li></ul><ul><li>Appreciation in the value of fixed assets </li></ul>
  6. 6. Step 2: Calculate CFO Particulars Amount (Rs.) Fund From Operation (FFO) -------- Add: Increase in Current Liabilities and Decrease in Current Assets -------- Less: Increase in Current Assets and Decrease in Current Liabilities -------- -------- Cash From Operation (CFO) --------
  7. 7. Step 3: Calculate CFS Sources (Inflow of cash) Amount (Rs.) Application (Outflow of cash) Amount (Rs.) Op. Bal. of cash ----- CFO ----- Cash from business Operations: Issue of Share Capital----- Issue of Debentures ----- Raising Loans ----- Sale of fixed Assets ----- Sale of Investments ----- Other miscellaneous Sources ----- ----- Meet Business Losses -----Purchase of Fixed Assets ----- Purchase of Investments ----- Repayment of Long-term Loans ----- Redemption of preference share ----- Payment of Dividend, etc. ----- Closing Bal. of Cash ----- ----- -----
  8. 8. THANK YOU

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