By: PREETI T (34) MEGHANA (26) RITU (40) KAVITA (28) NEHA (27) SHRUTI(47) ANUSUYA(2)

Cash Flow Statement is a statement, which describes the inflows (sources) and outflows (uses) of cash and cash equivalents during a specified period. It is a summary of cashbook.

A financial statement that summarizes the cash receipts and payments and net changes resulting from operating, financing and investing activities of an enterprise during a given period of time.

 True

picture of the availability of cash in the cash position

Change

Enable

the management to project future plans sources and uses of cash sound financial policies

Indicate

Facilitate

Provide

base for inter firm comparison

 Cash

Management Cash Planning Answers to Difficult Questions Discloses Reasons for success or failure

 Balance

Sheet at the opening and closing period

Profit

and Loss Account of Current year

Information

Additional

 Step

1: Calculate the increase or decrease in cash and cash equivalents by making a comparison of the opening and closing balance sheets. 2: Calculate the net cash flow from operating activities by analyzing the Profit and Loss Account, Balance Sheet and other additional information. For this purpose, they are two methods Direct and Indirect Method. They are explained, subsequently.

Step

 Step

3: Calculate the net cash flow from investing activities. 4: Calculate the net cash flow from financing activities.

Step

Step

5: Prepare a formal cash flow statement indicating the cash flows from operating, investing and financing activities.

 Step

6: Make an aggregate of net cash flows from three activities and ensure that the total net cash flow is equal to the net increase or decrease in cash and cash equivalents, as, calculated in Step 1. 7: Report the non-cash transactions that did not involve cash and cash equivalents in a separate schedule to the cash flow statement. Examples are redemption of debentures in exchange of issue of shares and purchase of machinery against issue of share capital etc.

Step

It is difficult to precisely define the term cash. A CFS does not indicate actual liquidity (i.e cash position) of business . CFS can only a supplement because it cannot replace balance sheet and income statement(i.e P & L a/c). Working capital being a wider concept of funds.

The method of Cash Flow

Direct Method

 Cash

flow from operations include cash receipts from sale of goods and services, cash payment to suppliers of goods and services, other cash payments and receipts. Total cash receipts and payments are to be calculated. Only cash receipts and cash payments from operating activities are considered.

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