Basics of Cash Flow Statement Video Lecture | Accountancy CUET Preparation - Commerce

Oh
you
now we'll start cash flow statement
before I start this chapter you must
know the meaning of cash flow statement
there are three words cash flow
statement you know the meaning of cash
and flow means it can be inflow it can
be outflow so cash flow statement means
this is the statement which records the
flows of the cash flow of the cash means
incoming and outgoing so any statement
which shows the flows of cash will be
called cash flow statement
so this flows of cash can be of two
types either it will be inflow or it
will be outflow inflow of cash means
incoming of cash in the former company
outflow of cash means outgoing of cash
from the company or in other words I can
say this is the statement of receipts
and payments because receipts are also
inflow of cash and payments are outflow
of cash now the thing is then what is
the difference between cash book and
cash flow statement you have already
learned the cash book you know on debit
side we record all the receipts and on
credit side we record all the payments
then what's the difference between cash
flow statement and cash book yes I will
let you know what's the difference
between that before I start the
difference between cash book and cash
flow statement you must know the
similarities between them I meant to say
cash book and
cash flow statement number one both are
made for a particular period generally
it is always 12 months and number two
both statement whether it's cash book or
cash flow statement they contain only
cash transaction they do not contain
non-cash transactions actually the
difference between cash book and cash
flow statement is that cash book
contains all the transactions day twice
each and every die elections but cash
flow statement in this statement all
these transactions time into say cash
transactions whether they are receives
or payments they are grouped in
different activities just like cash flow
statement roughly speaking it is the
compressed cash book recently I told you
that in cash flow statement all the
transactions are grouped into three
activities number one operating
activities number two investing
activities number three financial
activities means whether it's receipt or
payment all these the seeds and payments
of the business they fall in one of them
it will be operating activity or
investing activity or financial activity
now the thing is what is the meaning of
cash in literary sense all hard cash I
mean to say notes and points they are
called cash but nowadays in the modern
word in our businesses cash doesn't mean
notes and coins it also includes bank
balance etcetera
and moreover we also include cash
equivalent now it's a new thing for you
cash equivalent what is the meaning of
cash equivalent cash equivalent means
all the marketable investments are
called cash equivalents it means you
have invested money somewhere means any
investment that can be sold at any
moment without any significant loss that
investment will be called cash
equivalent so in cash flow statement
basically there is no difference between
cash and cash equivalents again cash
means hard cash means nodes points
deposits in the bank and any demand
deposits demand deposits means you have
invested money somewhere and it can be
taken at any moment
that's called demand deposit this is
just like cash and sometimes some
companies they invest the surplus cash
somewhere else I want to say somewhere
else outside if they are marketable
means if they can be sold or converted
into cash at any time without any
significant loss they are called cash
equivalent so whenever we use the word
cash in cash flow statement it means we
include all the things cash as well as
bank deposits demand deposits as well as
marketable investments I am going to say
cash equivalents one thing more
if there is any activity which requires
the moment between cash and cash
equivalent that is not recorded anywhere
in cash flow statement however this
thing is recorded in the cash book if
you sell the investments I mean to say
marketable investments which are also
called cash equivalent you have to
record this collection in your cash book
however what you have done you have sold
the investment and you have got hard
cash so you will write down on the
receipt side of the cash book I am to
say David said two marketable
investments but this type of
transactions I want to say the moment
between cash and cash equivalent is not
recorded anywhere in cash flow statement
now you must be thinking about this
thing that verse the use of making cash
flow statement if everything is recorded
in the cash book I am going to say every
receipt and every payment can be found
in the cash book then what is the use of
making cash flow statement actually cash
flow statement is a very good tool to
handle the cash management I want to say
so many important decisions are taken by
the management only on the basis of
analysis of cash flow statement because
cash flow statement does not record all
the transactions all transactions are
grouped in one particular activity so
the management can find out or can
calculate that how to manage the cash
but on the basis of cash book it is
almost impossible to take the decisions
that where the money is coming from and
the where the money is going to
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