Cash Flow Statement

 Cash Flow Statement summarises the changes in the amount of cash for a
particular period. It indicates the sources from which cash was obtained and
the used to which cash was put. Cash Flow Statement are prepared as per
Accounting Standard 3 issued by ICAI. The cash flow statement provides
information about Cash Receipts (cash inflows) and Uses of Cash (cash
outflows).
Objectives or Importance
 Useful for Short –Term Financial Planning
 Useful in Preparing the Cash Budget
 Comparison with the Cash Budget
 Study of the Trend of Cash Receipts and Payments
 Helpful in making Dividend Decisions
 Helpful in Ascertaining Cash Flow from Various Activities Separately
Classification of Business Activities :

 Operating Activities - Operating Activities are the principal revenue producing

activities of the enterprise and activities other than investing and financing.

 Cash Inflows 1) Cash Sales 2) Received from Debtor 3) Commission & Fees 4)
Royalty.

 Cash Outflows 1) Cash Purchases 2) Payment to Creditors 3) Cash Operating

Expenses 4) Payment of Wages 5) Income Tax 6) Manufacturing Expenses.
  Investing Activities - Investing Activities are activities related to acquisition
and disposal of long term assets and investments

 Investing Activities Cash Inflow 1) Sale of Fixed Assets 2) Sale of investments

3) Interest Received 4) Dividend Received

 Cash Outflow 1) Purchase of Fixed Assets 2) Purchase of Investments

 Financing Activities - Financing activities are the activities which result in
change in size and composition of owner’s capital and borrowing of the
organization.

 Cash Inflow 1) Issue of Shares in Cash 2) Issue of Debentures in Cash 3)

Proceeds from long-term borrowings

 Cash Outflow 1) Payment of Loans 2) Redemption of Preference Shares 3)

Payment of Dividends 4) Interest Paid