CASH FLOW SATATEMENT (AS-3)
Cash flow statement means a statement which reports flow of cash and cash
equivalent . this report is prepared as part of final account.
Methods of cash flow preparing
(i) Cash flow from cash accounts . (Direct Method)
(ii) Cash flow from balance sheet. ( Direct method+ indirect method)
(iii) Cash flow from Two balance sheet. (Indirect method)
Format (Direct method)
Cash flow statement
Cash flow from operating activities xxx
Cash flow from Investing activities xxx
Cash flow from Financing activities xxx
Total xxx
Add:- opening bal. of cash & cash equivalent xxx
closing balance of Cash & Cash equivalent
xxx
Cash flow from operating activities :- it means flow of cash and cash equivalent
from principal revenue generating activities and incidental items. For example
cash collected from Debtor
cash paid to creditors
cash paid for expenses
Note:- payment of income tax is considered to be cash flow from operating activities
Cash flow investing Activities :- it means cash & cash equivalent arising from flow
of cash from fixed assets and investment . its include income arising from disposal
of fixed assets and investment. For example
sale & purchase of fixed assets
sale & purchase of Investment
Dividend Income
Interest Income
Cash flow from financing Activities :- it means flow of cash and cash equivalent
arising from capital & loan. It also includes service cost of capital and loan. Loan
means loan borrowed short term, long term, secured , unsecured , Bank overdraft as
considered as loan as per AS-3. For example
Issue of share capital
Buy back of share capital
, Loan raised
loan repaid
Dividend paid
Interest paid
Cash & cash equivalent:- its include Bank balance (Not overdraft), short term in-
vestment releasable in 3 months, these investment are called marketable investment.
Cash flow can be prepared from 3 source of information
(i) By combing cash a/c (not yet asked in examination )
(ii) By analysing Balance sheet and P&L a/c
(iii) By analysing Balance sheet only
(II) CFS from 2 balance sheet and P&L a/c
cash flow can be prepared by analysis of a/c, appearing in 2 balance sheet and
P&L for this purpose account are required to be prepared and find out flow of cash.
Following account are to be prepared
(i) Fixed assets a/c (By gross method OR By net method)
(ii) Investment a/c
(iii) provision for taxation a/c
(iv) proposed dividend a/c with unpaid dividend
(v) current assets A/c ( Debtors, BR, Stock)(Note Cash & Bank a/c are not prepared)
(vi) Loan a/c
(vii) Reserve & Surplus a/c
(viii) Current Liabilities A/c ( Creditors, BP)
(ix) Share capital a/c
How to prepare Fixed assets account
this account to be prepared by any of following method
(a) Gross Method (b) Net method
whenever Opening & closing Bal. of accumulated depreciation is available , than
prepare gross method a/c otherwise prepare net method account.
(a) Gross Method
Fixed assets a/c
To Bal b/d By assets Disposal a/c ( Cost of assets sold)
To Bank (purchase) By Revaluation (loss)
To revaluation (Profit) By Bal c/d
Cash flow statement means a statement which reports flow of cash and cash
equivalent . this report is prepared as part of final account.
Methods of cash flow preparing
(i) Cash flow from cash accounts . (Direct Method)
(ii) Cash flow from balance sheet. ( Direct method+ indirect method)
(iii) Cash flow from Two balance sheet. (Indirect method)
Format (Direct method)
Cash flow statement
Cash flow from operating activities xxx
Cash flow from Investing activities xxx
Cash flow from Financing activities xxx
Total xxx
Add:- opening bal. of cash & cash equivalent xxx
closing balance of Cash & Cash equivalent
xxx
Cash flow from operating activities :- it means flow of cash and cash equivalent
from principal revenue generating activities and incidental items. For example
cash collected from Debtor
cash paid to creditors
cash paid for expenses
Note:- payment of income tax is considered to be cash flow from operating activities
Cash flow investing Activities :- it means cash & cash equivalent arising from flow
of cash from fixed assets and investment . its include income arising from disposal
of fixed assets and investment. For example
sale & purchase of fixed assets
sale & purchase of Investment
Dividend Income
Interest Income
Cash flow from financing Activities :- it means flow of cash and cash equivalent
arising from capital & loan. It also includes service cost of capital and loan. Loan
means loan borrowed short term, long term, secured , unsecured , Bank overdraft as
considered as loan as per AS-3. For example
Issue of share capital
Buy back of share capital
, Loan raised
loan repaid
Dividend paid
Interest paid
Cash & cash equivalent:- its include Bank balance (Not overdraft), short term in-
vestment releasable in 3 months, these investment are called marketable investment.
Cash flow can be prepared from 3 source of information
(i) By combing cash a/c (not yet asked in examination )
(ii) By analysing Balance sheet and P&L a/c
(iii) By analysing Balance sheet only
(II) CFS from 2 balance sheet and P&L a/c
cash flow can be prepared by analysis of a/c, appearing in 2 balance sheet and
P&L for this purpose account are required to be prepared and find out flow of cash.
Following account are to be prepared
(i) Fixed assets a/c (By gross method OR By net method)
(ii) Investment a/c
(iii) provision for taxation a/c
(iv) proposed dividend a/c with unpaid dividend
(v) current assets A/c ( Debtors, BR, Stock)(Note Cash & Bank a/c are not prepared)
(vi) Loan a/c
(vii) Reserve & Surplus a/c
(viii) Current Liabilities A/c ( Creditors, BP)
(ix) Share capital a/c
How to prepare Fixed assets account
this account to be prepared by any of following method
(a) Gross Method (b) Net method
whenever Opening & closing Bal. of accumulated depreciation is available , than
prepare gross method a/c otherwise prepare net method account.
(a) Gross Method
Fixed assets a/c
To Bal b/d By assets Disposal a/c ( Cost of assets sold)
To Bank (purchase) By Revaluation (loss)
To revaluation (Profit) By Bal c/d
