206 MANAGEMENT ACCOUNTING 4.13 PROFORMA OF CASH FLOW STATEMENT AS PRESCRIBED IN AS-3 4.13.1 Proforma of Cash Flow Statement under Direct Method [Paragraph (a) Page Il - 910] Cash Flow Statement of ______ for the period ended —____ ‘A. Cash Flows from Operating Activities: Cash Receipts from Customers Less: Cash Paid to Suppliers & Employees Cash Generated from Operation Less: Income Tax Paid Cash Flows from Operation before Extraordinary Items Add: Proceeds from any Disaster Settlement Net Cash Flow from Operating Activities B. Cash Flows from Investing Activities: Proceeds from Sale of Fixed Assets including Investments Less: Purchase of Fixed Assets Including Investments Add: Interest Received Dividend Received Net Cash Flow from Investing Acti . Cash Flows from Financing Acti Proceeds from Issuance of Share Capital Proceeds from Long-term Borrowings Less: Repayment of Long-term Borrowings including Redemption of Preference Shares Less: Interest Paid Dividend Paid Net Cash Flow from Financing Activities Net increase in Cash & Cash Equivalents Add: Cash & Cash Equivalents at the beginning of the period Cash & Cash Equivalents at the end of the period Cash Flow Statement of _____ for the period e 4.13.2. Proforma of Cash Flow Statement under Indirect Method [Paragraph nded. (b) Pagel - 910] A. Cash Flows from Operating Activities: Net Profit for the Period before Taxation & Extraordinary Items ‘Add: Adjustment for Non-current and Non-operating Items charged to Profit & Loss A/c: Depreciation Interest Paid Foreign Exchange Loss Loss on Sale of Fixed Assets & Investments Less: Adjustment for Non-current and Non-operating Items credited to Profit & Loss A/c: Interest Earned Dividend Earned Profit on Sale of Fixed Assets & Investments Operating Profit before Working Capital Changes Add: Increase in Operating Current Liabilities Decrease in Operating Current Assets Bs. RS, (Continued)(CASH FLOW ANALYSIS: Tess: Inctease in Operating Current Assets Decrease in Operating Current Liabilities - - Cash Generated from Operation = Less: Income Tax Paid - ‘Add: Proceeds from any Disaster Settlement - Net Cash Flow from Operating Activities B. Cash Flows from Investing Activities: Proceeds from Sale of Fixed Assets including Investments - Less: Purchase of Fixed Assets including Investments = Add: Interest Received - Dividend Received = Net Cash Flow from Investing Act . Cash Flows from Financing Activities: Proceeds from Issuance of Share Capital ~ Proceeds from Long-term Borrowings Less: Repayment of Long-term Borrowings including Redemption = of Preference Shares Less: Interest Paid - Dividend Paid = = Net Cash Flow from Financing Activities Net increase in Cash & Cash Equivalents ‘Add: Cash & Cash Equivalents at the beginning of the period Cash & Cash Equivalents at the end of the period 1k Stop and Think no difference between both the methods). The only difference between the direct and indirect methods lies in the calculation of Net Cash Flows from Operating Activities. Under direct method, the Net Cash Flow from the Operating Activities is directly calculated by deduct- ing the cash outflows from the Operating Activities from the Cash Inflows from the Operating Activities. On the other hand, under the indirect method, the Net Cash Flow from the Operating Activities is indirectly calculated by adding back all the non-operating and non-cash items debited and by deducting all the non-operating and non- cash items credited to the Profit & Loss A/c for an accounting year with the Net Profit for that year. Under both the ‘methods, the Net Cash Flows from investing and Financing Activities are calculated following the same approach (i.e, 4.14 FUNDAMENTAL DIFFERENCES BETWEEN CASH FLOW STATEMENT AS PER AS-3 AND TRADITIONAL METHOD i. As per Traditional Method, Cash means cash in hand and at bank (demand deposits) only, whereas as per AS-3, Cash includes not only cash in hand and at bank (demand deposits) but also short-term investments or marketable securities, fi. Cash Flows from different activities of an enterprise, such as operating, investing and Financing Activ- ities, can be separately known through the Cash Flow Statement prepared as per AS-3, by virtue of which the enterprise can identify its stronger and weaker area of cash generation. But, as per ‘Tradi tional Method, there is no such segregation of Cash Flows from the different activities of an enterprise. iii, As per AS-3, two separate approaches, namely, Direct and Indirect Method, may be followed for the preparation of a Cash Flow Statement, whereas a single approach is followed while preparing the Cash Flow Statement under Traditional Method. iv. Preparation of a Cash Flow Statement as per AS-3 is mandatory for all enterprises having an annual turnover of more than Rs. 50 crores and also for all companies whose shares or debts are listed on a recog- nized Stock Exchange of India. Enterprises those are not falling under the above categories may prepare their Cash Flow Statement as per the Traditional Method.