Commerce  >  Accountancy Class 12  >  Classification of Activities for the Preparation of Cash flow Statement

Classification of Activities for the Preparation of Cash flow Statement Video Lecture - Accountancy Class 12 - Commerce

FAQs on Classification of Activities for the Preparation of Cash flow Statement Video Lecture - Accountancy Class 12 - Commerce

1. What are the three main categories of activities in the preparation of a cash flow statement?
Ans. The three main categories of activities in the preparation of a cash flow statement are operating activities, investing activities, and financing activities. These categories help to classify the cash inflows and outflows of a company.
2. Can you provide examples of operating activities for the preparation of a cash flow statement?
Ans. Operating activities typically include cash flows from day-to-day business operations, such as revenue from sales, payment to suppliers, salaries and wages, and income taxes paid. Examples of operating activities also include interest received or paid, dividends received, and changes in working capital.
3. What types of activities fall under investing activities for the preparation of a cash flow statement?
Ans. Investing activities involve the purchase and sale of long-term assets, such as property, plant, and equipment, as well as investments in other companies. Cash flows from investing activities can include the purchase or sale of stocks and bonds, acquisitions or disposals of subsidiaries, and loans made to other entities.
4. Could you give some examples of financing activities in the context of preparing a cash flow statement?
Ans. Financing activities primarily involve cash flows related to the company's capital structure and financing arrangements. Examples of financing activities include the issuance or repayment of debt, proceeds from issuing or repurchasing company shares, payment of dividends to shareholders, and changes in bank overdrafts or loans.
5. How does the classification of activities in the preparation of a cash flow statement help stakeholders understand a company's financial position?
Ans. The classification of activities in a cash flow statement provides valuable insights into a company's sources and uses of cash. Stakeholders, such as investors and creditors, can analyze the cash flows from operating, investing, and financing activities to assess the company's ability to generate cash, its investment decisions, and its financing choices. This information helps stakeholders evaluate the company's liquidity, solvency, and overall financial health.
55 videos|90 docs|68 tests
55 videos|90 docs|68 tests
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