Cash Flow Statement Page 3
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30MODULE - 6A
Cash Flow Statement
Analysis of Financial Statements
Cash Flow Statement based on AS-3 (revised) presents separately cash
generated and used in operating, investing and financing activities.
It is very useful in the evaluation of cash position of a firm.
Notes
Cash and relevant terms as per AS-3 (revised)
As per AS-3 (revised) issued by the Accounting Standards Board
1.
(a) Cash fund :
Cash Fund includes (i) Cash in hand
(ii) Demand deposits with banks, and
(iii) cash equivalents.
(b) Cash equivalents are short-term, highly liquid investments, readily
convertible into cash and which are subject to insignificant risk
of changes in values.
2. Cash Flows are inflows and outflows of cash and cash equivalents.
The statement of cash flow shows three main categories of cash inflows
and cash outflows, namely : operating, investing and financing activities.
(a) Operating activities are the principal revenue generating activities
of the enterprise.
(b) Investing activities include the acquisition and disposal of long-
term assets and other investments not included in cash equivalents.
(c) Financing activities are activities that result in change in the size
and composition of the owner’s capital (including Preference
share capital in the case of a company) and borrowings of the
enterprise.
As per AS-3 the inflow and outflow of cash are :
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ACCOUNTANCY
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