Page 107 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting Sukhpreet Kaur, Lovely Professional University

Notes Unit 6: Cash Flow Statement

CONTENTS

Objectives
Introduction
6.1 Meaning of Cash Flow Statement
6.2 Classification of Cash Flow

6.2.1 Cash Flow from Operating Activities

6.2.2 Cash Flow from Investing Activities
6.2.3 Cash Flow from Financing Activities
6.3 Preparation of Cash Flow Statement
6.4 Summary

6.5 Keywords
6.6 Review Questions
6.7 Further Readings

Objectives

After studying this unit, you will be able to:

Explain the meaning of cash fl ow statement

Compute cash flow from operating, investing and fi nancing activity

Prepare cash flow statement as per AS-3
Introduction

Cash is considered one of the vital sources of the firm to meet day to day fi nancial commitments.

The cash is considered to be as most important source of life blood of the business. The day to
day financial commitments are met out only out of the available resources. The cash resources are

availed through two different types of receipts viz. sales, dividends, interests known as regular
receipts and sale of assets, investments known as irregular receipts of the business enterprise.

To have smooth flow of business enterprise, it should have ample cash resources for its operations.

The availability of cash resources is mainly depending on the cash inflows of the enterprises. The
smoothness in operations of the enterprise is obtained through an appropriate matching of cash

inflows and cash outfl ows.
To have smoothness in the operations of the enterprise, the firm should have an appropriate

volume of cash resources at speedier rate as well as more than the financial commitments of

the firm. This smoothness could be attained by way of an appropriate planning analysis on the

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