Cash Flow Statement

IMPORTANT POINTS
1. Cash inflow xxx cash receipts
Cash outflow (xxx) cash payment
2. Rules
a. Assets increased (xxx)
Assets decreased xxx
b. Capital/Liabilities increased xxx
Capital/Liabilities decreased (xxx)
Three Business Activities

Business Activities

Operating Investing Financing

activities activities activities
a. Operating activities:
• Cash collection from sales and debtors xxx
• Cash payment to purchase and creditors (xxx)
• Payment to employees and other operating expenses (xxx)
• Payment of interest (xxx)
• Payment of tax (xxx)
• Cash flow from current assets except cash and bankxxx or
(xxx)
• Cash flow from current liabilities xxx or (xxx)
b. Investing activities: Long term assets related
(i.e. fixed assets and long term investment)
Purchase of fixed assets and investment (xxx)
Sales of fixed assets and investment xxx
c. Financing activities:
Long term liabilities and capital related
Issue of shares and debentures xxx
Redemption of shares and debentures (xxx) Dividend paid
(xxx)
Premium on redemption of debentures (xxx)
Borrowing of long term loan/bank loan xxx
Repayment of long term loan/bank loan (xxx)
 Practice

Page no. 370

Q.N. 1 [HSEB QUESTION 2066]
 Cash Flow Statement
Direct Method
PARTICULARS AMOUNT AMOUNT (Rs.)
(Rs.)
Operating Activities:
a. Cash collection from sales and debtors/A/R/B/R:
Net sales 625,000 625,000
b. Cash payment to purchase and creditors/A/P/B/P:
Cost of goods sold (300,000)
Stock (inventory) increase (50,000)
Account payable increase 10,000 (340,000)
c. Payment to employees and other operating expenses:
Operating expenses (Rs. 150,000-Rs. 80,000-Rs. 10,000) (60,000) (60,000)
Prepaid/outstanding/payable -
d. Payment of interest (10,000)
Interest on debenture
e. Payment of tax -
1. Net cash flow from operating activities (a+b+c+d+e) 215,000
Investing Activities:
Purchase of fixed assets (380,000)
Sales of fixed assets (Book value +gain) 55,000 (325,000)
2. Net cash flow from investing activities (325,000)
Financing Activities:
Issue of shares 270,000
Redemption of debenture (60,000)
Dividend paid (105,000) 105,000
3. Net cash flow from financing activities 105,000
Net cash decrease (1+2+3) (5,000)
Add: Opening balance of cash and bank 100,000
Closing balance of cash and bank 95,000