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Manpreet Kaur, Lovely Professional University Unit 8: Cash Flow Statement

Unit 8: Cash Flow Statement Notes

CONTENTS
Objectives
Introduction

8.1 Meaning of Cash Flow Statement
8.2 Utility of Cash Flow Statement
8.3 Steps in the Preparation of Cash Flow Statement

8.4 Preparation of Cash Flow Statement
8.5 AS-3 Revised Cash Flow Statement
8.6 Summary
8.7 Keywords
8.8 Self Assessment

8.9 Review Questions
8.10 Further Readings

Objectives

After studying this unit, you will be able to:

Know the utility of cash flow statement
List of the steps in the preparation of cash flow statement
Prepare preparation of cash flow statement
Illustrate the AS-3 Revised cash flow statement

Introduction

Cash is considered one of the vital sources of the firm to meet day to day financial 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 outflows.
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 flow statement
analysis which facilitates the firm to identify the possible sources of cash as well as the expenses
and expenditures of the firm.

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