Cash Flow Statement Page 28
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30MODULE - 6A
Cash Flow Statement
Analysis of Financial Statements
As the present business moves from the cash basis to accrual basis, the
prepaid and credit transactions might be represented an increase in
working capital and it would be misleading to equate net income to cash
flow because a number of non cash items would affect the net income.
Notes
INTEXT QUESTIONS 30.4
Fill in the blanks with suitable word/words
(i)
Provision for taxation is ........................... expenses.
(ii)
Increases in share capital is ...........................
(iii) purchase of fixed assets is ...........................
(iv) Decrease in share capital is ...........................
(v)
Sale a fixed assets is ...........................
(vi) Issue of debentures is ...........................
WHAT YOU HAVE LEARNT
Cash flow statement deals with flow of cash which includes cash
equivalent as well as cash.
Cash flow statement is a summary of cash receipts and disbursements
during a certain period.
Cash flow statement is prepared as per AS-3 (Revised).
There are two methods for preparing cash flow statement : (i) Direct
method (ii) Indirect method.
Cash flow statement shows three categories of cash inflows and
outflows i.e. (i) Operating activities (ii) Investing activities (iii) Financing
activities
Operating activities are the revenue generating activities of the enterprise.
Investing activities constitute the acquisition and disposal of long term
assets and other investments not included in cash and its equivalents.
Financing activities are activities that result in change in the size and
composition of the share capital and borrowings of the enterprise.
The cash flows from extraordinary items are to be stated separately as
arising from operating, investing and financing activities.
89
ACCOUNTANCY
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