PPT - Cash Flow Statements | Accountancy Class 12 - Commerce PDF Download

 Page 1


Cash Flow 
Statement
Page 2


Cash Flow 
Statement
Introduction
Position Statement
Shows the financial position of an 
enterprise as on a particular date, 
presenting a snapshot of assets, 
liabilities and equity.
Income Statement
Shows the result of operational 
activities over a particular period, 
detailing revenues, expenses and 
resulting profit or loss.
Cash Flow Statement
Shows inflows and outflows of cash and cash equivalents from various 
activities over a period, classified into operating, investing and financing 
activities.
Financial statements of companies are prepared following accounting 
standards prescribed in the Companies Act, 2013. These standards are notified 
under section 133 and are mandatory in nature. The Cash Flow Statement is 
prepared in accordance with Accounting Standard-3 (AS-3) and is a required 
component of financial statements.
Page 3


Cash Flow 
Statement
Introduction
Position Statement
Shows the financial position of an 
enterprise as on a particular date, 
presenting a snapshot of assets, 
liabilities and equity.
Income Statement
Shows the result of operational 
activities over a particular period, 
detailing revenues, expenses and 
resulting profit or loss.
Cash Flow Statement
Shows inflows and outflows of cash and cash equivalents from various 
activities over a period, classified into operating, investing and financing 
activities.
Financial statements of companies are prepared following accounting 
standards prescribed in the Companies Act, 2013. These standards are notified 
under section 133 and are mandatory in nature. The Cash Flow Statement is 
prepared in accordance with Accounting Standard-3 (AS-3) and is a required 
component of financial statements.
Objectives of Cash Flow 
Statement
Provide Useful 
Information
Shows inflow and 
outflow of cash 
and cash 
equivalents from 
various activities 
during a specific 
period under 
operating, investing 
and financing 
heads.
Enable 
Assessment
Provides users with 
a basis to assess 
the ability of the 
enterprise to 
generate cash and 
cash equivalents 
and the needs to 
utilise those cash 
flows.
Support Decision 
Making
Economic 
decisions require 
evaluation of an 
enterprise's ability 
to generate cash 
and cash 
equivalents and 
the timing and 
certainty of their 
generation.
Page 4


Cash Flow 
Statement
Introduction
Position Statement
Shows the financial position of an 
enterprise as on a particular date, 
presenting a snapshot of assets, 
liabilities and equity.
Income Statement
Shows the result of operational 
activities over a particular period, 
detailing revenues, expenses and 
resulting profit or loss.
Cash Flow Statement
Shows inflows and outflows of cash and cash equivalents from various 
activities over a period, classified into operating, investing and financing 
activities.
Financial statements of companies are prepared following accounting 
standards prescribed in the Companies Act, 2013. These standards are notified 
under section 133 and are mandatory in nature. The Cash Flow Statement is 
prepared in accordance with Accounting Standard-3 (AS-3) and is a required 
component of financial statements.
Objectives of Cash Flow 
Statement
Provide Useful 
Information
Shows inflow and 
outflow of cash 
and cash 
equivalents from 
various activities 
during a specific 
period under 
operating, investing 
and financing 
heads.
Enable 
Assessment
Provides users with 
a basis to assess 
the ability of the 
enterprise to 
generate cash and 
cash equivalents 
and the needs to 
utilise those cash 
flows.
Support Decision 
Making
Economic 
decisions require 
evaluation of an 
enterprise's ability 
to generate cash 
and cash 
equivalents and 
the timing and 
certainty of their 
generation.
Benefits of Cash Flow Statement
1
Comprehensive Financial Picture
When used with other financial statements, 
provides information that enables users to 
evaluate changes in net assets, financial 
structure (including liquidity and solvency), and 
ability to affect cash flow timing to adapt to 
changing circumstances.
2
Assessment and Comparison
Cash flow information is useful in assessing the 
ability to generate cash and enables users to 
develop models to compare the present value of 
future cash flows of different enterprises.
3
Enhanced Comparability
Enhances the comparability of operating 
performance reporting by different enterprises 
by eliminating effects of using different 
accounting treatments for the same transactions 
and events.
4
Accuracy and Balance
Helps in balancing cash inflow and outflow, 
checking accuracy of past assessments of future 
cash flows, and examining relationships between 
profitability, net cash flow and impact of 
changing prices.
Page 5


Cash Flow 
Statement
Introduction
Position Statement
Shows the financial position of an 
enterprise as on a particular date, 
presenting a snapshot of assets, 
liabilities and equity.
Income Statement
Shows the result of operational 
activities over a particular period, 
detailing revenues, expenses and 
resulting profit or loss.
Cash Flow Statement
Shows inflows and outflows of cash and cash equivalents from various 
activities over a period, classified into operating, investing and financing 
activities.
Financial statements of companies are prepared following accounting 
standards prescribed in the Companies Act, 2013. These standards are notified 
under section 133 and are mandatory in nature. The Cash Flow Statement is 
prepared in accordance with Accounting Standard-3 (AS-3) and is a required 
component of financial statements.
Objectives of Cash Flow 
Statement
Provide Useful 
Information
Shows inflow and 
outflow of cash 
and cash 
equivalents from 
various activities 
during a specific 
period under 
operating, investing 
and financing 
heads.
Enable 
Assessment
Provides users with 
a basis to assess 
the ability of the 
enterprise to 
generate cash and 
cash equivalents 
and the needs to 
utilise those cash 
flows.
Support Decision 
Making
Economic 
decisions require 
evaluation of an 
enterprise's ability 
to generate cash 
and cash 
equivalents and 
the timing and 
certainty of their 
generation.
Benefits of Cash Flow Statement
1
Comprehensive Financial Picture
When used with other financial statements, 
provides information that enables users to 
evaluate changes in net assets, financial 
structure (including liquidity and solvency), and 
ability to affect cash flow timing to adapt to 
changing circumstances.
2
Assessment and Comparison
Cash flow information is useful in assessing the 
ability to generate cash and enables users to 
develop models to compare the present value of 
future cash flows of different enterprises.
3
Enhanced Comparability
Enhances the comparability of operating 
performance reporting by different enterprises 
by eliminating effects of using different 
accounting treatments for the same transactions 
and events.
4
Accuracy and Balance
Helps in balancing cash inflow and outflow, 
checking accuracy of past assessments of future 
cash flows, and examining relationships between 
profitability, net cash flow and impact of 
changing prices.
Cash and Cash Equivalents
Cash
As per AS-3, 'Cash' comprises cash in hand and 
demand deposits with banks. These are the most 
liquid assets available to a business for immediate use 
without restriction.
Cash Equivalents
'Cash equivalents' means short-term highly liquid 
investments that are readily convertible into known 
amounts of cash and which are subject to an 
insignificant risk of changes in value.
An investment normally qualifies as cash equivalents 
only when it has a short maturity, of say, three months 
or less from the date of acquisition.
Investments in shares are excluded from cash equivalents unless they are in substantial cash equivalents, such as 
preference shares acquired shortly before their specific redemption date with insignificant risk of failure to repay 
at maturity.