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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

Change in the cash position

Enable the management to project future plans

Indicate sources and uses of cash

Facilitate sound financial policies

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

Additional Information

Step 1: Calculate the increase or decrease in cash and cash equivalents by making a comparison of the opening and closing balance sheets.

Step 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 3: Calculate the net cash flow from investing activities.

Step 4: Calculate the net cash flow from financing activities.

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.

Step 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.

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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