Cash Flow Statement

Introduction to Cash Flow Statement

The Cash Flow Statement is a crucial financial statement that provides a detailed analysis of the inflows and outflows of cash and cash equivalents during a specific accounting period. It differs from the Profit and Loss Account and the Balance Sheet, which are prepared on an accrual basis, by focusing solely on actual cash transactions. This statement helps users understand how a company generates and uses its cash, which is vital for assessing liquidity, solvency, and financial flexibility. Cash and cash equivalents include cash in hand, cash at bank, and short-term, highly liquid investments that are readily convertible into cash. The Cash Flow Statement is prepared to complement the other financial statements by providing information about the cash position of the business, which is essential for decision-making by investors, creditors, and management. It helps in evaluating the ability of the company to generate cash, meet its obligations, pay dividends, and finance its operations and investments.

• Cash Flow Statement shows actual cash inflows and outflows during an accounting period.
• It focuses on cash and cash equivalents, unlike accrual-based Profit and Loss Account.
• Helps assess liquidity, solvency, and financial flexibility of the company.
• Cash equivalents include cash in hand, cash at bank, and short-term liquid investments.
• Complements other financial statements by providing cash position details.
• Useful for investors, creditors, and management for decision-making.
• 📌 Cash Flow Statement: A financial statement showing cash inflows and outflows during a period.
• 📌 Cash and Cash Equivalents: Cash in hand, cash at bank, and short-term liquid investments.
• 📌 Liquidity: The ability of a company to meet its short-term obligations.

Classification of Cash Flows

Cash flows are classified into three main categories to provide a clear understanding of the sources and uses of cash during an accounting period. This classification helps users analyze the cash generation and utilization patterns of a business. The three categories are: (A) Cash Flows from Operating Activities, (B) Cash Flows from Investing Activities, and (C) Cash Flows from Financing Activities. Operating activities include the principal revenue-producing activities of the company and other activities that are not investing or financing activities. Investing activities relate to the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities involve changes in the size and composition of the equity capital and borrowings of the company. The net cash flow from these activities helps in understanding the overall cash position and the reasons for changes in cash and cash equivalents during the period. **Table on page 8 (7 rows × 2 cols)** | (A) Cash flows from operating activities | XXX :selected: | | --- | --- | | (B) Cash flows from investing activities | XXX :selected: | | (C) Cash flows from financing activities | XX | | Net increase (decrease) in cash and cash | XXX :selected: | | equivalents (A + B + C) | | | + Cash and cash equivalents at the beginning | XXX :selected: | | = Cash and cash equivalents at the end | XXXX :selected: | **Table on page 8 (17 rows × 5 cols)** | | 1. | Purchase of machinery. | 2. | Proceeds from issue of equity share capital. | | --- | --- | --- | --- | --- | | | 3. | Cash revenue from operations. | 4. | Proceeds from long-term borrowings. | | | 5. | Proceeds from sale of old machinery. | 6. | Cash receipt from trade receivables. | | | 7. | Trading commission received. | 8. | Purchase of non-current investment. | | | 9. | Redemption of preference shares. | 10. | Cash purchases. | | | 11. | Proceeds from sale of non-current investment. | 12. | Purchase of goodwill. | | | 13. | Cash paid to supplier. | 14. | Interim dividend paid on equity shares. | | | 15. | Employee benefits expenses paid. | 16. | Proceeds from sale of patents. | | | 17. | Interest received on debentures held as investments. | 18. | Interest paid on long-term borrowings. | | | 19. | Office and administrative expenses paid. | 20. | Manufacturing overheads paid. | | | 21. | Dividend received on shares held as investment. | 22. | Rent received on property held as investment. | | | 23 | Selling and distribution expenses paid. | 24. | Income tax paid. | | | 25. | Dividend paid on preferences shares. | 26. | Under-writing commission paid. | | | 27 29. | Rent paid. Bank overdraft. | 28. | Brokerage paid on purchase of non- | | | | | | current investment. | | | 30. | Cash credit. | 31. | Short-term deposit. | | | 32. | Marketable securities. | 33. | Refund of income-tax received. | **Table on page 12 (12 rows × 2 cols)** | Pak Particulars | (Rs.) | | --- | --- | | (Net Profit before Taxation and Extraordinary Items (Note 1) Adjustments for- man Kan | 42,000 | | + Depreciation | 20,000 | | = Operating Profit before working capital changes | 62,000 | | - Increase in Trade Receivables :unselected: | (3,000) | | - Increase in Inventories | (5,000) | | Increase in Prepaid Insurance | (500) | | Decrease in Trade Payables | (2,000) | | + Increase in Outstanding Employees Benefits Expenses | +1,000 | | = Cash generated from Operations | 52,500 | | Income tax paid | (11,000) | | = Net cash from Operating Activities | 41,500 | **Table on page 13 (13 rows × 3 cols)** | Particulars | Note No. | Amount (Rs.) | | --- | --- | --- | | i) Revenue from Operations | | 60,000 | | ii) Other Income | 1 | 5,000 | | iii) Total Revenue (i+ii) | | 65,000 | | iv) Expenses | | | | Cost of materials consumed | | 15,000 | | Employees benefits expenses | | 10,000 | | Depreciation and Amortisation expenses | 2 | 7,000 | | Other expenses | 3 | 13,000 | | | | 45,000 | | v.) Profit before tax (iii-iv) | | 20,000 | | vi) Provision for taxation | | 8,000 | | vii) Profit after tax (v-vi) | | 12,000 | **Table on page 15 (5 rows × 2 cols)** | Net Profit after Tax | 12,000 | | --- | --- | | Provision for Taxation made | 8,000 | | | 20,000 | | Less-Income tax refund | (3,000) | | | 17,000 | **Table on page 15 (5 rows × 6 cols)** | Particulars | J.F. | Amount (Rs.) | Particulars | J.F. | Amount (Rs.) | | --- | --- | --- | --- | --- | --- | | Bank | | | Balance b/d | | 10,000 | | (Income Tax paid during the year | | 5,000 | Statement of Profit ublist GARY | | 8,000 | | Banalce c/d | | 13,000 | | | | | | | 18,000 | | | 18,000 | **Table on page 15 (8 rows × 3 cols)** | Additional Information: | March 31, 2017 (Rs.) | March 31, 2016 (Rs.) | | --- | --- | --- | | Trade Receivables | 20,00,000 | 40,00,000 | | Trade Payables | 20,00,000 | 10,00,000 | | Other Expenses payable (administrative) | 10,000 | 20,000 | | Prepaid Administrative Expenses | 20,000 | 10,000 | | Outstanding Trading Expenses | 20,000 | 40,000 | | Advance Trading Expenses | 40,000 | 20,000 | | Provision for Taxation | 10,00,000 | 12,00,000 | **Table on page 16 (12 rows × 2 cols)** | Particulars | (Rs.) | | --- | --- | | Net Profit before Taxation Adjustment for Non-cash and Non-operating Items : | 1,30,000 | | + Depreciation | 20,000 | | + Goodwill amortised | 7,000 | | - Gain on sale of machinery | (3,000) | | Operating profit before working capital | 1,54,000 | | Adjustment for working capital charges : | | | - Increase in Trade receivables :unselected: | (3,000) | | + Increase in Trade payables :selected: | 6,000 | | - Increase in Prepaid expenses | (200) | | - Decrease in Outstanding expenses :unselected: | (2,000) | | = Net Cash from Operating Activities :unselected: | 1,54,800 | **Table on page 16 (6 rows × 2 cols)** | republike Particulars MERT | Amount (Rs.) | | --- | --- | | Cash Revenue from operations | 8,00,000 | | Credit Revenue from operation | 34,00,000 | | | 42,00,000 | | Less returns | (2,00,000) | | Revenue from operations (Net) | 40,00,000 | **Table on page 16 (4 rows × 2 cols)** | and De Particulars | Amount (Rs.) | | --- | --- | | Trading commission | 20,40,000 | | Discount received from suppliers | 60,000 | | | 21,00,000 | **Table on page 17 (5 rows × 2 cols)** | Particulars ACERT | Amount (Rs.) | | --- | --- | | Administrative expenses | 10,20,000 | | Discount allowed to customers | 1,20,000 | | Bad debts | 1,00,000 | | | 12,40,000 | **Table on page 18 (13 rows × 3 cols)** | Items: | | Treatment | | --- | --- | --- | | (a) | Increase in the value of creditors | | | (b) | Increase in the value of patents | | | (c) | Decrease in prepaid expenses | | | (d) | Decrease in income received in advance | | | (e) | Decrease in value of inventory | | | (f) | Increase in share capital | | | (g) | Increase in the value of trade receivables | | | (h) | Increase in the amount of outstanding expenses | | | (i) | Conversion of debentures into shares | | | (j) | Decrease in the value of trade payables | ished | | (k) | Increase in the value of trade receivables | | | (1) | Decrease in the amount of accrued income. | | **Table on page 18 (3 rows × 2 cols)** | Welprint Ltd. has given you the following information: | Rs. | | --- | --- | | Machinery as on April 01, 2016 | 50,000 | | Machinery as on March 31, 2017 | 60,000 | **Table on page 19 (8 rows × 3 cols)** | Particulars | J.F. | Amount (Rs.) | | --- | --- | --- | | Balance b/d | | 50,000 | | Statement of Profit and Loss (profit on sale of machine) | | | | | | 3,000 | | Cash (balancing figure:new machinery purchased) | | | | | | 35,000 | | | | 88,000 | | | | | **Table on page 19 (8 rows × 3 cols)** | Particulars | | Amount (Rs.) | | --- | --- | --- | | Cash (proceeds | | | | from sale of machine) | | 13,000 | | Accumulated | | | | Depreciation | | 15,000 | | | | 60,000 | | | | 88,000 | | | | | **Table on page 19 (5 rows × 6 cols)** | Particulars | J.F. | Amount (Rs.) | Particulars | J.F. | Amount (Rs.) | | --- | --- | --- | --- | --- | --- | | Machinery | | 15,000 | Balance b/d | | 25,000 | | Balance c/d | :unselected: | 15,000 | Statement of Profit and Loss (Depreciation provided during the year) | | 5,000 | | | | | | | | | | | 30,000 | | | 30,000 | **Table on page 19 (3 rows × 3 cols)** | | flows from April 1, 2016 | activities: March 31, 2017 | | --- | --- | --- | | | Rs. | Rs. | | Long-term Loans | 2,00,000 | 2,50,000 | **Table on page 20 (4 rows × 6 cols)** | Particulars | J.F. | Amount (Rs.) | Particulars | J.F. | Amount (Rs.) | | --- | --- | --- | --- | --- | --- | | Cash (loan repaid) | | 1,00,000 | Balance b/d | | 2,00,000 | | Balance c/d | | 2,50,000 | Cash (new loan raised) | | 1,50,000 | | | | 3,50,000 | | | |

• Cash flows are divided into Operating, Investing, and Financing activities.
• Operating activities relate to core business operations generating revenue.
• Investing activities involve acquisition and disposal of long-term assets.
• Financing activities include changes in equity and borrowings.
• Classification helps analyze sources and uses of cash distinctly.
• Net cash flow from all three activities shows overall cash movement.
• 📌 Operating Activities: Principal revenue-generating activities of the business.
• 📌 Investing Activities: Acquisition and disposal of long-term assets and investments.
• 📌 Financing Activities: Transactions affecting equity and borrowings.