A presentation about the Cash Flow Statement ,whole chapter is covered in the slides .one can easily understand the concept of cash flow statement and a video is also there but link went missing so please search it on youtube by the name of "cash flow statement in 3-min" a beautiful video to understand the basic concept of cash flow statement.In the end a numerical has solved for the better understanding ,which let u fetch marks in your examinations.

1. Cash Flow Statement
Presented By:
Naveen Kr Saini
Vansh kapoor
Garima Yadav
Manisha Anand
Mohit Paliwal
Anuj Gupta
Karan Rana
ICFAI Business School
Gurgaon
Class of 2016

2. What is Cash flow statement ?
In simple language we can define it like ,
how much a business gets in cash and how
much it pays in cash.
 The purpose of cash flow statement is to
provide relative information about cash
receipts and cash payments of an enterprise
during a period .
Let’s make it more clear by following video

3. Why we need “CASH FLOW STATEMENT “ ???
Lets try to understand this with the help of
following Question :
What does an organization do with the huge profits
it makes every year ?
Answer to such a question ,you will not find in an
enterprise’s balance sheet or profit & loss account .
Again WHY?

4. Because Balance sheet provides you the
information about an enterprise’s assets &
how those assets have been financed.
 Whereas Profit & Loss A/c provides you the
information about financial performance of
an enterprise.
 Thus to answer this question ,we need a
statement that provides information on the
major sources of cash receipts & cash
payments i.e cash flow statement .

5. Cash Flow Statement allows us to understand :
how a company’s operations are
running
Where its money is coming from & how
it is being spent
 Cash Flow Statement helps in assessing
 Enterprise’s liquidity
 Financial flexibility
 Profitability
 Risk

6. Importance
 To determine enterprise’s rate of return or value
 To assess the ability of an enterprise to generate cash
and cash equivalents.
 Helps to identify the sources from where cash inflows
have arisen within a particular period and also shows
the various activities where in cash was utilised.
It shows if a business is running out of money even if
it is profitable.
It makes clear how much money was used to purchase
property and equipment

7. Objectives
 Comparison with the cash budget :A cash budget is
prepared at the commencement of the year ,where as
cash flows is prepared at the end of the year
 It helps in planning the repayment of loan schedule and
replacement of fixed assets ,etc.
It helps in efficient and effective management of cash.
It is very useful in the evaluation of cash position of a
firm.
Based on AS-3, it presents cash generated & used in
operating , investing & financing activities.

8. The Structure of the Cash Flow
Statement
Cash Flow is determined by looking at three activities
by which cash enters and leaves a company :
 Operating Activities
Investing Activities
Financing Activities

9. Cash Inflow Activities Cash Outflow
Operating Activities
Payments to suppliers
& Employees for
Materials & Services.
Payments to
Government for taxes
& Duties.
Receipts from
Customers for sales of
goods & Services.
Investing Activities
Payments for
purchase of Fixed
Assets
Payments to
Government for taxes
Receipts from Sales of
investments &
Collection of Loans.
Receipts from Sales of
Fixed Assets
Receipts from interest & Duties.
& dividends on loans &
investments.

10. Cash Inflow Activities Cash Outflow
Financing Activities
Payments for dividends
on share capital.
Payments for Interest
on debentures & other
borrowings.
Receipts from issuance
of share capital.
Payments for buy-back
of share capital
and redemption of
debentures & loans.
Receipts from issuance
of debentures.
Receipts from other
borrowings

11. Indian Accounting Standard
Indian accounting standards are a set of
accounting standards notified by the ministry of
corporate Affairs which are converged with
international financial reporting Standards(IFRS)
These accounting standards are formulated by
accounting standards boards of Institute of
Chartered Accountants of India

12. Objectives of Indian Accounting
Standard
 To remove variations in the treatment of several
accounting aspects
To bring about standardization in presentation
They Intent to harmonize the diverse accounting
policies followed in the preparation & presentation of
financial statements by different reporting enterprises so
as to facilitate intra-firm and inter –firm comparison..

13. Accounting Standard (AS) 3
“Cash Flow Statements”(revised 1997) comes into effect in
respect of accounting periods commencing on or after 1-4-
1997.
 This Standard supersedes AS-3 ,’Changes in Financial
Position’, issued in 1981.
 This standard is mandatory in nature in respect of
accounting periods commencing on or after 1-4-2004 for the
enterprises which fall in any one or more of the categories
in the next slide, at any time during the accounting period .

14. • Enterprise whose equity or debt securities are listed
whether in India or outside India.
• Enterprise which are in the process of listing their equity
or debt securities as evidenced by the board of
directors.
• Banks including co-operative banks.
• Financial institutions .
• Enterprises carrying on insurance business.
• All commercial, industrial and business reporting
enterprises, whose turnover for the immediately preceding
accounting period on the basis of audited financial
statements exceeds Rs. 50 crore. Turnover does not include
‘other income’.

15. •All commercial, industrial and business reporting
enterprises having borrowings, including public deposits, in
excess of Rs.10 crore at any time during the accounting
period.
• Holding and subsidiary enterprises of any one of the
above at any time during the accounting period.
The enterprises which do not fall in any of the above
categories are encouraged, but are not required, to apply
this Standard.

16. Types of Methods For Operating Cash
Flows
Cash Flow Statement can be derived either from Direct
Method or Indirect Method
 Direct Method:
Major classes of gross cash receipts & gross cash
Payments are disclosed.
 Indirect Method :
Profit or Loss is adjusted for the effects of transactions of
a non-cash nature, any deferrals or accruals of past or
future operating cash receipts or payments.

17. Users of Cash Flow Statement
Internal Users (Primary Users) – includes
• Management – For analyzing the organisation’s
performance & position and taking appropriate measures
to improve the company results .
• Employees – for assessing company’s profitability and
its consequences on their future remuneration & job
security.
• Owners – For analyzing the viability & profitability of
their investment & determining any future course of action.

18. External Users(Secondary Users) – includes
• Creditors – For determining the credit worthiness of the
organization.
•Tax authorities – For determining the credibility of the tax
returns filed on behalf of the company.
• Investors – For analyzing the feasibility of investing in the
company. Investors want to make sure they can earn a
reasonable return on their investment before they commit
any financial resources to the company.
• Customers – For assessing the financial position of its
suppliers which is necessary for them to maintain a stable
source of supply in the long term.

19. What do Users use the Cash Flow
Statement For ???
Investors ,analysts ,managers and creditors etc use cash
flow information for :
 Risk Assessment : Auditors can also use these cash flow
ratios to identify discrepancies between the cash flow
statement and other financial statements
 Liquidity & Solvency :To provide information on a firm’s
liquidity and solvency and its ability to change cash
flows in future circumstances.

20.  Trend Analysis : External users can use a company's cash
flow statements from several accounting periods to
determine trends. A positive trend of steady or increasing
cash flow indicates financial health .
 Enterprise’s ability to meet its obligations & ability to pay
dividends & its needs for external financing .
The reasons for difference between net profit & associated
cash receipts & payments.

21. Limitations
Cash flow statement cannot be equated with the Income
Statement. An income statement takes into account both
cash as well as non-cash items and, therefore, net cash flow
does not necessarily mean net income of the business.
The cash balance as disclosed by the cash flow statement
may not represent the real liquid position of the business
since it can be easily influenced by postponing purchases
and other payments.
Interpreting Data- Sometimes, it is difficult to interpret
data in cash flow, for e.g - it may be difficult to gauge
whether the company should be investing more in a plant.

22. Cash flow Statement
A. Cash Flow from Operating Activities
Net Profit Before Tax XXX
Adjustments for :
Depreciation XXX
Loss on Sale of Fixed Assets XXX
Gain on Sale of Fixed Assets (XXX)
Interest Paid XXX
Interest Received (XXX)
Dividend Received (XXX)
Operating Profit Before Working Capital Changes XXX
ADD : Increase in Current Liabilities XXX
Decrease In Current Assets XXX
LESS : Increase in Current Assets XXX
Decrease In Current Liabilities XXX
Income Tax Paid (XXX)
Net Cash from Operating Activities XXX XXX

23. B CASH FLOWS FROM INVESTING ACTIVITES.
Purchase of Fixed Assets (XXX)
Purchase of Long Term Investments (XXX)
Sale of Fixed Assets XXX
Sale of Long Term Investments XXX
Interest Received XXX
Dividend Received XXX
Net cash from investing Activities XXX XXX

24. C. CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital XXX
Repayment of long- term borrowings (XXX)
Proceeds from long- term borrowings XXX
Interest paid (XXX)
Dividend paid (XXX)
Net cash from financing Activities XXX XXX
Net Inc./Dec. in Cash & Cash Equivalent (A+B+C) xxx
Cash & Cash Equivalent at the beg. of the period xxx
Cash & Cash Equivalent at the End of the Period xxx

25. Analyzing with a following question ,
The summarized Balance sheet of XYZ Ltd. As at 31st March 2010 and
2011 are :
Liabilities
31st March
2010
31st
March
2011 Assets
31st March
2010
31st March
2011
Share Capital 4,50,000 4,50,000 Fixed Assets 4,00,000 3,20,000
General Reserve 3,00,000 3,10,000 Investments 50,000 60,000
Profit and Loss Ac 56,000 68,000 Stock 2,40,000 2,10,000
Creditors 1,68,000 1,34,000 Debtors 2,10,000 4,55,000
Provision for taxation 75,000 10,000 Bank 1,49,000 1,97,000
Mortgage - 2,70,000
10,49,000 12,42,000 10,49,000 12,42,000
Additional Information:
Investments costing Rs 8,000 were sold during the year 2010-11 for Rs 8,500
Provision for taxation made during the year was Rs 9,000
During the year, part of the fixed assets costing Rs 10,000 was sold at Rs
12,000 and the profit was included in the Profit and Loss Ac
Dividend paid during the year amounted to Rs 40,000
You are required to prepare Cash Flow Statement.

26. Solution : Cash Flow Statement
For the year ended 31st march,2011
A. Cash Flow from operating activities
Closing bal of P &L A/c (31st March 2011) 68000
less : opening balance of P& L (31st March 2010) -56000
Add: Innterim Dividend 40000
Provision for tax 9000
Transfer to reserve 10000
Net Profit Before Tax 71000
add: depreciation 70000
less: profit on sale of investment -500
profit on sale of fixed assets -2000 67500
operatoing profit before working capital change 138500
Add : decrease in current asset & inc in current liability:
decrease in stock (Rs.240000-rs.210000) 30000
less : increase in current asset & dec in current liability:
incresase in debtors (Rs. 455000-Rs.210000) -245000
dec in creditors (Rs.168000-rs.134000) -34000 -249000
cash genrated from operations -110500
less: incomme tax paid -74000
Net Cash used in operating activities -184500

27. B. Cash Flow From Investing Activities
Purchase of investments -18000
Sale of Fixed Assets 12000
Sale of investments 8500
Net cash from investing activities 2500
C. Cash flow From Financing Activities
Mortgage loan 270000
Dividend Paid -40000
Net cash from financing activities 230000
D. Net inc in cash & cash equivalents (A+B+C) 48000
Cash & Cash Equivalents in the beginning of yr 149000
Cash & Cash Equivalents at the end of yr 197000

28. Working Notes :
Fixed Assets Account
1. Dr. Cr
Particulars Rs. Particulars Rs.
To Balance b/d 400000 By bank A/c 12000
To Profit & Loss A/c 2000 By Depreciation A/c(Bal Fig) 70000
(profit on sale) By balance c/d 320000
402000 402000
Investments Account
2. Dr. Cr
Particulars Rs. Particulars Rs.
To Balance b/d 50000 By BankA/c 8500
TO profit and lossA/c 500 By Balance c/d 60000
To Bank A/c(Bal.fig.) 18000
68500 68500
Provision For Taxation Account
3. Dr. Cr
Particulars Rs. Particulars Rs.
To Bank A/c 74000 By balance B/d 75000
To Balance c/d 10000 By Profit and loss a/c(Provision9s 0m0a0de)
84000 84000

29. Any Questions ????

30. Thank You !!!!