Page 233 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes 2. The ...................... 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.

3. The cash includes not only means that cash in hand but also ...................... .

13.2 Classification of Cash Flow

As per AS-3 (revised) the cash flow statement is prepared in a manner reporting the cash fl ows
into following categories:

13.2.1 Cash Flow from Operating Activities

Cash flows from operating activities are earned from the principal revenue - producing activities

of an enterprise. Through these activities the net profit or loss of the business is also determined.
Examples of such a flow from operating activities are given in AS-3 (revised) as follows:

1. Cash receipts from the sale of goods and rendering of services;
2. Cash receipts from royalties, fees, commissions and other revenue;
3. Cash payments to suppliers for goods and services;

4. Cash payments to and on behalf of employees;
5. Cash receipts and cash payments of an insurance enterprise for premiums and claims,
annuities and other policy benefi ts;
6. Cash payments or refunds of income taxes unless they can be specifi cally identifi ed with

financing and investing activities, and
7. Cash receipts and payments relating to future contracts, forward contracts, option contracts
and swap contracts when the contracts are held for dealing or trading purposes.
!
Caution Some transactions, such as the sale of an item of plant, may give rise to a gain or
loss which is included in the determination of net profit or loss. However, the cash fl ows

relating to such transactions are cash flows from investing activities.

Figure 13.1: Diagrammatic Presentation of Cash Flows from Operating Activities

Cash Flows

Cash Inflows
Cash Outflows

Cash Sales Receipts Receipts Refund of Receipts
from from Tax from
Debtors Royalties Future
Fees, Commission Contracts
and Others

Cash Payment Payment Payment Payment
Purchases of of of of
Salaries Tax Contracts Creditors

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