CASH FLOW STATEMENT
Cash flow statement is a statement which shows inflows and outflows of cash and its equivalents in an enterprise during a specific period of time. According to the revised accounting slandered 3 an enterprise should prepare a cash flow statement and should present it for each period for which financial statements are presented. Cash flows exclude movements between items that constitute cash or cash equivalents because these components are part of the cash management of an enterprise rather than part of its operating,investing and financing activities.
According to AS-3 the cash flow statement should report cash flows during the period classified by operating,investing and financing activities.
Operating activities-Operating activities are the principal revenue-producing activities of the enterprise and other activities that are not financing or investing.the amount of cash flows arising from operating activities is a key indicator of the enterprise have generated sufficient cash the extent to which the operations of the enterprise have generated sufficient cash flow to maintain the operating capability of the enterprise to pay dividends,repay loans and make investments without recourse to external sources of financing.
Investing Activities-investing activities are the acquisition and disposal of long term assets and other investments not included in cash equivalents.it is important to make a separate disclosure of cash flows arising from investing activities because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flow.Examples of cash arising arising from investing activities are- cash payments to acquire fixed assets.
Financing activities-financing activities are activities that result in changes in the size an composition of the owners capital and borrowings of the enterprise.The separate disclosure of cash flows from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds to the enterprises.
can flow can be prepared by using two methods i.e The direct method and The Indirect method generally the indirect method is more important
How to prepare cash flow by indirect method
>take net profit before tax and extra-ordinary items.
>Make adjustment for non cash and non operating item
>Make adjustment for gains and losses on sale of fixed assets
>Make adjustment for changes in current operating assets
>Deduct income tax paid
>Make adjustment for extra ordinary item
Cash flow statement is a statement which shows inflows and outflows of cash and its equivalents in an enterprise during a specific period of time. According to the revised accounting slandered 3 an enterprise should prepare a cash flow statement and should present it for each period for which financial statements are presented. Cash flows exclude movements between items that constitute cash or cash equivalents because these components are part of the cash management of an enterprise rather than part of its operating,investing and financing activities.
According to AS-3 the cash flow statement should report cash flows during the period classified by operating,investing and financing activities.
Operating activities-Operating activities are the principal revenue-producing activities of the enterprise and other activities that are not financing or investing.the amount of cash flows arising from operating activities is a key indicator of the enterprise have generated sufficient cash the extent to which the operations of the enterprise have generated sufficient cash flow to maintain the operating capability of the enterprise to pay dividends,repay loans and make investments without recourse to external sources of financing.
Investing Activities-investing activities are the acquisition and disposal of long term assets and other investments not included in cash equivalents.it is important to make a separate disclosure of cash flows arising from investing activities because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flow.Examples of cash arising arising from investing activities are- cash payments to acquire fixed assets.
Financing activities-financing activities are activities that result in changes in the size an composition of the owners capital and borrowings of the enterprise.The separate disclosure of cash flows from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds to the enterprises.
can flow can be prepared by using two methods i.e The direct method and The Indirect method generally the indirect method is more important
How to prepare cash flow by indirect method
>take net profit before tax and extra-ordinary items.
>Make adjustment for non cash and non operating item
>Make adjustment for gains and losses on sale of fixed assets
>Make adjustment for changes in current operating assets
>Deduct income tax paid
>Make adjustment for extra ordinary item
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