Page 231 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting Sukhpreet Kaur, Lovely Professional University

Notes Unit 13: Cash Flow Analysis (As Per AS-3)

CONTENTS

Objectives
Introduction
13.1 Meaning of Cash Flow Statement
13.2 Classification of Cash Flow

13.2.1 Cash Flow from Operating Activities
13.2.2 Cash Flow from Investing Activities
13.2.3 Cash Flow from Financing Activities
13.3 Preparation of Cash Flow Statement
13.4 Summary
13.5 Keywords
13.6 Review Questions

13.7 Further Readings

Objectives

After studying this unit, you will be able to:
Explain the meaning of cash fl ow statement

Compute the cash flow form 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

cash resources of the firm. The meaningful analysis is only possible through cash fl ow statement

analysis which facilitates the firm to identify the possible sources of cash as well as the expenses
and expenditures of the fi rm.
13.1 Meaning of Cash Flow Statement
The cash flow statement is being prepared on the basis of extracted information of historical

records of the enterprise. Cash flow statements can be prepared for a year, for six months, for

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