Professional Documents
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Statement
Statement Financial of
Of Balance Retained
Sheet Statements Earnings
Cash flow
Statement
Introduction
Summarizes a companys cash inflows and
outflows.
Summarizes the operating, investing and
financing activities of the business.
Provides complementary information to
accrual based income statement.
Why is Cash Flow Statement
prepared?
Income Statement only deals with operating
activities and is based on accrual basis.
It is not the change in cash that is emphasized
but the explanation for change in cash.
It helps to evaluate managements decision.
Determines the ability to pay dividends to
stockholders and payment to creditors
The Definition Of Cash
Cash in hand
Cash in bank
Cash equivalent
Classification Of Cash Flows
Financing activities
Investing activities
Operating activities
Financing activities
Concerned with raising and repaying of funds
in the form of debt and equity.
Examples:-
i. Cash proceeds from issuing shares and other
similar instruments
ii. Cash proceeds from issuing debentures,
loans, notes, bonds and other short or long
term borrowings
i. Cash repayment of amounts borrowed
ii. Dividends paid
Investing activities
Activities concerned with acquisition and disposal
of long term assets.
Examples:-
i. Cash payments to acquire fixed assets
ii. Cash receipts from disposal of fixed assets
iii. Cash payments to acquire shares, warrants or
debt instruments of other enterprises
iv. Cash receipts from disposal of shares, warrants
and debt instruments
Operating activities
It is the principal revenue producing activities
of the enterprise.
It is a key indicator of the extent to which
operations of the enterprise have generated
sufficient cash flows.
Examples:-
i. Cash receipts from the sale of goods and the
rendering of services.
ii. Cash receipts from royalties, fees , commissions and
other revenues.
iii. Cash payments to suppliers for goods and services.
iv. Cash receipts and payments to insurance enterprise
for premiums and claims, annuities and other
benefits.
v. Cash payments and refund of income taxes.
Non cash investing and financing
activities
Companies sometimes engage in important
investing and financing activities that do not
affect cash and are required to disclose it.
Conversion
of accrual
to cash
basis
Total stockholder's
equity $346,000 $268,000
harigopal@kusom.edu.np
Julian Corp.
Partial Statement of Cash Flows
For the year Ended December 31, 2007
harigopal@kusom.edu.np
harigopal@kusom.edu.np