Page 171 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes
Example: From the following profit & loss account, you are required to compute cash
from operations.
Profit and Loss Account
for the year ending 31st Dec, 2009

To Salaries 10,000 By Gross profit 50,000
To Rent 2,000 By Profit on sale of land 10,000
To Depreciation 4,000 By Income tax refund 6,000
To Loss on sale of plant 2,000
To Goodwill written off 8,000
To Proposed dividend 10,000
To provision for taxation 10,000
To Net profit 20,000
66,000 66,000

Net profit made during the year 20,000
Add:
Non-cash expenses
Depreciation 4,000
Loss on sale of plant 2,000
Goodwill return off 8,000
Non-operating expenses
Proposed dividend 10,000
Provision for taxation 10,000 34,000
Less:
Non cash income
Profit on sale of land 10,000
Non operating income
Income tax refund 6,000 16,000
38,000

Task Illustrate the impact of the changes taken place on the current assets and
current liabilities to the tune of cash flows determination of the firm.

8.5 AS-3 Revised Cash Flow Statement

Cash flow statement provides information about the cash receipts and payments of an enterprises
for a given period. It provides important information that supplements the profit and loss
account and balance sheet.

The statement of cash flows is required to be reported by Accounting Standard-3 (Revised)
issued by the Institute of Chartered Accountants of India in March 1997 Which replaces the
'Changes in Financial Position' as per AS-3.
There are certain changes in the preparation of cashflow statement from the previous methods
as a result of the introduction of AS-3 (Revised).

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