Page 179 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes 8.6 Summary

Cash flow statement indicates sources of cash inflows and transactions of cash outflows
prepared for a period.

It is an important tool of financial analysis and is mandatory for all the listed companies.
The cash flow statement indicates inflow and outflow in terms of three components:
(1) Operating, (2) Financing, and (3) Investment activities.

Cash inflows include sale of assets or investments, and raising of financial resources.
Cash outflows include purchase lo assets or investments and redemption of financial
resources.

8.7 Keywords

Adjusted Profit & Loss A/c: Statement devised to determine the cash from operations.
Cash from Operations: Cash resources accrued in the business operations.

8.8 Self Assessment

Choose the appropriate answer:
1. Cash flow means

(a) Change in cash position
(b) Change in working capital position
(c) Change in current assets position
(d) Change in current liabilities position
2 Adjusted profit & loss account is to determine
(a) Cash from operations

(b) Cash lost in operations
(c) Cash from operations or cash lost in operations
(d) None of the above.
3. Comparison in between the current assets and current liabilities to determine
(a) Cash inflow

(b) Cash outflow
(c) Both (a) & (b)
(d) None of the above.
4. Non-current accounts are prepared for the cash inflows and cash outflows on the basis of
following relationship
(a) Non-current asset account and cash
(b) Non-current liability account and cash
(c) Both (a) & (b) only
(d) None of the above.

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