The Cash Flow Statement is one of the three keys of financial statements that reports the cash generated and spent during a specific period of time (i.e., a month, quarter, or year). It contains data of all the transaction of cash inflow and outflow during a financial year. The statement of cash flows acts as a bridge between the income statement and Balance sheet by showing how money moved in and out of the business.

Three Sections of the Statement of Cash Flows:

  1. Operating Activities: Operating activities are the functions of a business directly related to providing its goods and/or services to the market. These are the company’s core business activities, such as manufacturing, distributing, marketing, and selling a product or service.
  2. Investing Activities: Cash flow from investing activities is an item on the cash flow statement that reports the aggregate change in a company’s cash position resulting from investment gains or losses and changes resulting from amounts spent on investments in capital assets, such as plant and equipment.
  3. Financing Activities: Financing activities are transactions or business events that affect long-term liabilities and equity. In other words, financing activities are transactions with creditors or investors used to fund either company operations or expansions. These transactions are the third set of cash activities displayed on the statement of cash flows

sections in cash flow statement

Cash Flow Terminologies

Cash FlowInflows and outflows of cash and cash equivalents are known as cash flow.

Cash Balance: Cash on hand and demand deposits, commonly shown in the balance sheet.

Cash Equivalentscash equivalents include cash held as bank deposits, short-term investments, and any very easily cash-convertible assets – includes overdrafts and cash equivalents with short-term maturities (less than three months).

 

Methods Of Cash Flow Statement

There are 2 types of methods for preparing cash flow statements.  They are:

  1. Direct Method
  2. Indirect Method (mostly asked by examiners in an exam)

The format of the Direct Method 

Guru Shishya Classes

Statement of Cash Flow statements

for the year ending 31st March 2018

 Particular
ACash Flow From Operating Activities
Cash Received From customers
Cash paid to customer
Cash paid to the employee
Cash paid for interest
Cash paid for income tax
XXX
(XXX)
(XXX)
(XXX)


XXX
Net Cash From/(Used) in Operating activitiesXXX
BCash Flow From Investing Activities
Purchase Of Fixed assets
Sale of Fixed assets
(XXX)
XXX
(XXX)
Net Cash From/(Used) in Investing activities(XXX)
CCash Flow From Financing Activities
Proceeds From Issue Of Shares
Proceeds from Long term borrowings
Repayment of Long term borrowings
Interest Paid
Dividend Received
XXX
XXX
(XXX)
(XXX)
(XXX)



XXX
Net Cash From/(Used) in Financing activitiesXXX
Net Cash Increase(Decrease) In Cash & Cash Equivalents {A+B+C}XXX
+Cash & Cash Equivalents at the beginning of the yearXXX
Cash & Cash Equivalents at the end of the yearXXX
TotalXXX

The format of the Indirect Method 

Guru Shishya Classes

Statement of Cash Flow statements

for the year ending 31st March 2018

 Particular
ACash Flows from Operating Activities:
Net profit before taxXXX
+
+
+
+
-
Depreciation Expense
Interest Paid
Dividend Paid
Loss on Sale of Equipment
Gain on Sale of Land
XXX
XXX
XXX
XXX
(XXX)


XXX
Operating Profit Before Changing In Working CapitalXXX
+
+
-
-
Increase in Current Assets
Decrease in Current laibilities
Decrease in Current Assets
Increase in Accrued Elexpenses
XXX
XXX
(XXX)
(XXX)

XXX
Operating Profit After Changing In Working CapitalXXX
+Income Tax PaidXXX
Net Cash From/(Used) in Operating activitiesXXX
BCash Flow From Investing Activities
Purchase Of Fixed assets
Sale of Fixed assets
Interest Received
Dividend Received
(XXX)
XXX
XXX
XXX

XXX
Net Cash From/(Used) in Investing activitiesXXX
CCash Flow From Financing Activities
Proceeds From Issue Of Shares
Proceeds from Long term borrowings
Repayment of Long term borrowings
Interest Paid
Dividend Received
XXX
XXX
(XXX)
(XXX)
(XXX)



(XXX)
Net Cash From/(Used) in Financing activities(XXX)
Net Cash Increase(Decrease) In Cash & Cash Equivalents {A+B+C}XXX
+Cash & Cash Equivalents at the beginning of the yearXXX
Cash & Cash Equivalents at the end of the yearXXX
TotalXXX