Accounts Project

❖Acknowledgment:
I, Soham Purohit, would like to thank our principal, Mrs.
Revathi Srinivasan, for giving me this opportunity to make a
Commerce Project on the topic, ‘Marketing Mix’. This project has
enhanced me with a lot of knowledge and experience and also
helped me develop my research skills.
I would like to thank my commerce teacher, Mrs. Preeti
Swaroop, for her valuable guidance and constant support.
Lastly, I would like to thank my parents and my friends who
have helped me in completing this project. The completion of this
project would not have been possible without their help.

❖Meaning:
➢ In financial accounting, a cash flow statement, also known as
statement of cash flows, is a financial statement that shows how
changes in balance sheet accounts and income affect cash and cash
equivalents, and breaks the analysis down to operating, investing
and financing activities. Essentially, the cash flow statement is
concerned with the flow of cash in and out of the business. As an
analytical tool, the statement of cash flows is useful in determining
the short-term viability of a company, particularly its ability to pay
bills. International Accounting Standard 7 (IAS 7) is the International
Accounting Standard that deals with cash flow statements.
➢ Operating activities
■ Operating activities include the production, sales and
delivery of the company’s product as well as collecting
payment from its customers. This could include purchasing
 raw materials, building inventory, advertising, and shipping
the product.
➢ Investing activities
■ Investing activities include the acquisition and disposal of
long term acids and other investments not included in cash
equivalents which are not held for resale.
➢ Financial activities
■ Financing activities are the activities which result in change
in size and composition of the owners’ capital (including
preference share capital in case of a company) and
borrowings of the enterprise. Financing activities include
inflows and outflows of cash between investors and the
company.
❖Importance:
➢ Facilitates to determine Net Cash Flow
■ Cash Flow Statement shows inflows (sources) and outflows
(applications) of Cash and Cash Equivalents for a period It
facilitates to determine Cash Flow from Operating, Investing
and Financing Activities and Net changes in Cash and Cash
Equivalent.
➢ Facilitates Planning or Projected Cash Flow
■ Projected Cash Flow Statement helps management to plan
funds’ requirement in future for operating, investing, and
financing activities of an enterprise.
➢ Helps in assessing Liquidity and Solvency
■ Solvency means the ability of an enterprise to meet its
liabilities as they become due financial institutions, like
banks, prefer Cash Flow Statement to assess the capability of
the enterprise to pay its liabilities towards interest and
principal in time.
➢ Cash Management
 ■ The Cash Flow Statement provides information as to surplus
or deficit of cash. An enterprise, therefore, is in a position to
plan investment of the surplus and can arrange credit in case
of deficit.
➢ Comparative Study
■ A comparison of the Cash Flow Statement for the year with
the budget shows the extent to which cash generated and
applied met the plan. It is, therefore, useful for the
management to prepare the cash budgets.
➢ Test for the Management Decisions
■ It is an accepted rule that fixed assets are purchased from
long-term funds and long-term borrowings are repaid from
cash generated from operating activities. Cash Flow
Statement shows whether the decisions of the management
are in accordance with the established principle.
❖Advantages:
➢ Cash Flow Statement helps in knowing the exact figure of cash
inflows and outflows from various operations of the business. It
helps in comparing the cash budgets of past assessments with the
present to assess the future requirements of the cash. It gives
accurate information about the cash-based transactions in the
business.
➢ Cash flow statement is majorly used in preparing the cash budget
for future needs and helps in knowing the periodical requirement
of cash in the business.
➢ It reveals the key changes required for the financial positioning of
the business and prioritizes important activities to the
management.
➢ It provides information about various investing and financing cash
transactions that takes place during the year and helps in
evaluating the financial structure of the business. Cash Flow
 statement helps in identifying the profitability of the business when
it compared with the ratio analysis.
❖Disadvantages:
➢ Non-cash Transactions are not Reported
■ The Cash Flow Statement shows only inflows and outflows of
Cash and Cash Equivalents. It does not show non-cash
transactions such as purchase of buildings by the issue of
shares or debentures to the vendors because such
transactions do not affect Cash and Cash Equivalents.
➢ Not a Substitute for Income Statement
■ This statement is not a substitute of income Statement
(Statement of Profit & Loss) but is a statement that gives
additional information. Income Statement shows both cash
and non-cash transactions leading to determination of profit
or loss. Income Statement shows net income of the firm
whereas Cash Flow Statement shows inflow or outflow of
Cash and Cash Equivalents which is not net profit or loss of
the enterprise.
➢ Not a Substitute for Balance Sheet
■ A balance sheet shows what a company owns in the form of
assets and what it owes in the form of liabilities.
■ A balance sheet also shows the amount of money invested by
shareholders listed under shareholders' equity.
■ The cash flow statement shows the cash inflows and outflows
for a company during a period.
■ In other words, the balance sheet shows the assets and
liabilities that result, in part, from the activities on the cash
flow statement.
➢ Historical in Nature
■ It rearranges the available information in the Income
Statement (Statement of Profit & Loss) and the Balance Sheet.
Thus, it is historical in nature.
❖Difference between Cashflow Statement and Income Statement

Basis of Cash Flow Statement Income Statement

Distinction
Definition The cash flow The Income statement is
statement helps an used by an organization to
organization to record record all items related to
the total inflows as revenues, expenses, gains
well as outflows of and losses during a
cash during a particular accounting
particular accounting period.
period.
Basis The cash flow The income statement
statement follows the follows the accrual basis of
cash basis of accounting that works on
accounting that works the basis of
on the actual income/payments that are
payments and receipts either due or received in
of cash. advance.
Division The cash flow The income statement is
statement is classified classified into two activities
into three activities which are as follows:
which are as follows:
· Operating
· Operating
· Non-operating
· Investing
 · Financing
Usage The cash flow The Income statement helps
statement helps to to determine the
know the solvency and profitability of a company
liquidity of a business, during a particular financial
which will help to year.
determine the present
as well as future cash
flows.
Preparation The cash flow The income statement is
statement is prepared prepared on the basis of
on the basis of both various ledger accounts and
the income statement records of a company.
and the balance sheet
of a company.

Indian Tobacco Company

❖Introduction
➢ Established in 1910, ITC Limited is a diversified conglomerate with
businesses spanning Fast Moving Consumer Goods comprising
Foods, Personal Care, Cigarettes and Cigars, Education &
Stationery Products, Incense Sticks and Safety Matches; Hotels,
Paperboards and Packaging, Agri Business and Information
Technology. The Company was incorporated on August 24, 1910
under the name Imperial Tobacco Company of India Limited. As the
Company's ownership progressively Indianised, the name of the
Company was changed to India Tobacco Company Limited in 1970
 and then to I.T.C. Limited in 1974. In recognition of the ITC's
multi-business portfolio encompassing a wide range of businesses,
the full stops in the Company's name were removed effective
September 18, 2001. The Company now stands rechristened 'ITC
Limited,' where 'ITC' is today no longer an acronym or an initialised
form.
➢ Earnings Per Share for the year stood at Rs. 9.45 (previous year Rs.
7.93), while Cash flows from Operations aggregated Rs. 9,596 crores
compared to Rs. 8,334 crores in the previous year.
❖Comparative analysis of Cash FLow Statement of ITC Ltd.
➢ Revenue from Operations:
■ The company experienced consistent revenue growth over
the three-year period, indicating a positive trajectory in its
business performance. The revenue increased by ₹11221
crores from 2021 to 2022 and by ₹10505.72 crores from 2022 to
2023. The increasing trend in revenue from operations
suggests that the company has been successful in expanding
its customer base, increasing market share, or capturing new
business opportunities.

Year 31st March, 2021 31st March, 2022 31st March, 2023

Rs. in crores 48524.56 59745.56 70251.28

Source: livemint
 ➢ Profit Before Tax:
■ Over the course of 3 year, the profit earned by the company is
increasing thus showing a good performance and impressive
sales. The increase in profit before tax of the company for the
year 2021-22 was ₹2665.34 and for 2022-23, the profits
increased by ₹4,920.88. A significant increase in profits over
the course of three years indicates that the company has
experienced substantial financial success and improvement
in its financial performance during that period. This could be
due to factors such as increased sales, cost-cutting measures,
improved operational efficiency, successful product launches,
expanding market share, or favorable economic conditions.
Year 31st March, 2021 31st March, 2022 31st March, 2023

Rs. in crores 17164.19 19829.53 24750.41

➢ Operating Profit before Working Capital changes:
■ The company has experienced an increase in operating profit
before working capital changes over course of three years.
■ Profit increased from 2021 to 2022 by 3313.93 crore and from
the year 2022 to 2023 increased by 3103.91 crore.
■ A positive cash flow indicates a company has enough money
coming in to reinvest in the business, pay down debt, return
money to shareholders, and withstand financial challenges.

Year 31st March 2021 31st March 31st March 2023

2022
Rs. in 15845.41 19133.71 24156.43
crores

➢ Cash Flow from Operating Activities:

■ The company experienced an increase in cash flow from
operating activities from 2021 to 2022 which is ₹3,313.93 and
from 2022 to 2023, increase is by ₹3,103.91. Increasing cash
flow from operating activities has several positive effects,
including improved financial health, better ability to invest
and grow, enhanced debt management, increased dividends
and shareholder value

Year 31st March 2021 31st March 31st March 2023

2022
Rs. in 11493.86 14807.79 17911.70
crores
➢ Cash Flow from Investing Activities:
■ The company experienced a decrease in cash flow from
investing activities from 2021-22 and 2022-23.
■ Cash used from investing activities for the year 2021-22
was ₹8,014.95 and for the year 2022-23 was ₹3,642.31.
■ Decreasing cash flow from investing activities can lead
to limited growth and expansion, reduced
diversification, potential asset sales, and may impact
the company's ability to fund acquisitions or repay
debts. It could also raise concerns among investors
about the company's future prospects and strategic
direction.
Year 31st March 2021 31st March 31st March 2023
2022
Rs. in 6497.89 (1517.06) (5159.37)
crores

➢ Cash Flow from Financial Activities:

■ The Cash Used in Financial Activities has been
decreasing for the years 2021-22 and 2022-23. The cash
used in financial activities in the year 2021-22 was
₹5041.86. The cash used in financial activities in the
year 2022-23 was ₹606.6. The cash used has decreased
over the course of these years.
■ Decreasing cash used in financial activities can lead to
potential benefits like increased funds for reinvestment
and growth, stock buybacks, and improved financial
 health. However, it may also result in reduced debt
repayment and lower dividend payments, which could
raise concerns among investors.

Year 31st March 2021 31st March 31st March 2023

2022
Rs. in (18378.89) (13337.03) (12730.43)
crores
❖Conclusion:
➢ In conclusion, the cash flow statement is a crucial financial
statement that provides valuable insights into a company's cash
inflows and outflows from various activities. Through the analysis
of a company's cash flow statement, we were able to gain a deeper
understanding of its financial health and performance.
➢ The analysis focused on the cash flow from operating activities,
investing activities, and financing activities. We examined the
trends, changes, and factors influencing each category of cash flow.
➢ It is important to closely monitor the company's ability to generate
consistent cash flow from its core operations, as this is indicative of
its operational efficiency and sustainability. Analyzing the nature
and magnitude of these cash flows provides insights into the
company's investment decisions and potential growth strategies.
Monitoring the company's financing activities is essential for
understanding its capital structure and the impact on its financial
position.
➢ Overall, the practical analysis of the company's cash flow statement
highlighted the importance of monitoring cash flows to assess a
company's liquidity, solvency, and ability to fund its operations and
growth. It also emphasized the need for a comprehensive
understanding of the company's financial statements, ratios, and
industry context to derive meaningful insights from the cash flow
statement.

❖Bibliography:
➢ T.S Grewal’s Management Accounting Book
➢ www.itcportal.com
➢ www.livemint.com
➢ www.moneycontrol.com
➢ www.resources.workable.com