accounting standard-3 cash flow stataements. points need to be remember this standard is mandatory...
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POINTS NEED TO BE REMEMBERPOINTS NEED TO BE REMEMBER This standard is mandatory in nature in respect of
accounting periods on or after 1-4-2004 for the enterprises which fall in the category of level-I, at any time during the accounting period. For all other enterprises it is not mandatory.
Where an enterprises was not covered by this statement during the previous year but qualifies in the current accounting year – no need of disclose the figures for the corresponding previous year.
Whereas, if an enterprises qualifies in previous year and now disqualified – will continue to prepare cash flow statements for another two consecutive years.
OBJECTIVEOBJECTIVE
Cash flow statement (CFS) – additional information- provided to the users – in form of the statement, which reflects the various sources from where cash was generated (Inflow of Cash) by an enterprise during the relevant accounting year and how these inflows were utilized (Outflow of cash) by the enterprise.
PRESENTATION OF A CASH FLOW PRESENTATION OF A CASH FLOW STATEMENTSTATEMENT
Cash comprises cash on hand and demand deposits with banks.
Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash.
Cash flows are inflows and outflows of cash and cash equivalents.
PARA -6 of Accounting Standard-3PARA -6 of Accounting Standard-3
Cash Equivalents are held for the purpose of meeting short-term cash commitments (Maximum three months of maturity from the date acquisition) rather than for investment or other purposes.
Highly Liquid Investments.Readily Convertible.Convertible amount of cash is known.Subject to an insignificant risk of changes in
value.
For Example:-For Example:-Share capital is not considered as cash equivalent
even though they are readily convertible into cash, because the amount that will be realized on sale of investment is not determinable unless investment is actually sold.
Fixed deposit for one year is also not considered as cash equivalent because they are not readily convertible into cash, even though the amount is determinable.
“Always Remember the concept of three months or less”
RELEVANT DEFINITIONSRELEVANT DEFINITIONS
Operating activities are the principal revenue-producing activities of the enterprise.
Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.
Financing activities are activities that result in changes in the size and composition of the owner’s capital (including preference share capital in the case of a company) and borrowings of the enterprise.
PRESENTATION OF THE CASH PRESENTATION OF THE CASH FLOW STATEMENTFLOW STATEMENT
The cash flow statement should report cash flows during the period.
The cash flows have to be classified activity-wise into operating, investing and financing activities.
Net cash Flow From
Operating Activities
Investing Activities
Financing Activities
Direct Method
In-Direct Method
Direct Method
Direct Method
Format of Cash Flow Statement for the year ended 20xx( Direct Method)
Particulars Rs. Rs.
Cash received from sale of goods xxx
Cash received from Debtors xxx
Cash Received from sale of services xxx xxx
Less: Payment for Cash Purchases xxx
Payment to creditors xxx
Payment for operating expenses xxx
e.g. Power, Rent, Electricity.
Payment for wages & Salaries xxx
Payment for Income Tax xxx xxx
xxx
Adjustment for Extraordinary Items xxx
Net Cash Flow from Operating Activities xxx
Format of Cash Flow Statement for the year ended 20xx( In-Direct Method)
Particulars Rs. Rs.
Operating activities: xxx
Closing balance of profit and Loss Account xxx
Less: Opening balance of profit and Loss account xxx
xxx
Reversal the effects of profit & Loss Appropriation A/c. xxx
Add: Provision for Income Tax. xxx
Effects of Extraordinary items xxx
Net Profit Before Tax and extraordinary items xxx
Reversal the effects of non-cash & Non-operating items xxx
Effects for changes in working capital except cash & Cash equivalent xxx
Less: Payment of income Tax xxx xxxAdjustment for extraordinary Items xxx
Net cash flow from operating activities xxx