Cash flow statement

Every businessman needs capital or cash for successful implementation of business activities. Capital is needed for acquiring fixed assets, while cash is needed for acquiring current assets or payment of current liabilities. Cash requirements or cash planning or cash management is very important for every business.

Proper cash planning is needed for paying cash liabilities or payment for the supplies to get the facility of cash discount. A reasonable cash balance should be maintained, it should not be too high or too low both flow situations are bad.

There are many technologies for cash management, cash flow statement is one of the techniques. It speaks about cash inflow and cash outflows and the balance in the end. The management can know, how cash is coming and how the same is used. In the present chapter, cash flow statement is fully discussed in theory and practical both.

Cash flow statement

What is the cash flow statement? – Definition A cash-based statement of financial position that defines financial resources as cash, and explain what caused the changes in the cash balance during the year is called cash flow statement. Cash flow statement shows the movement in cash items that takes place over a given financial period. …

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Sources of cash

In any given period cash will be generated by any of the following activities: Net profit made in the period. Increase in share capital during the year. Increase in any liability during the year Decrease in any asset during the year Let us consider each of the above sources in some detail. Net Profit as …

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Cash flow from investing activities

Explanation Investing activities are the acquisition and disposal of non-current assets and other investments not included in cash equivalents. The separate disclosure of cash flows arising from investing activities is important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. The …

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Non cash Incomes

Definition and Explanation Just as non-cash expenses do not result in cash outflow, non-cash incomes do not lead to cash inflow and must, therefore, be excluded from the year’s profit. The two examples of non-cash incomes are appreciation in value of a fixed asset arising out its revaluation, and profit on sale of a fixed …

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Non cash Expenses

Definition and Explanation Certain items are debited to Profit and Loss Account (or Income Statement) as an expense though they are not paid out in cash in that particular period. The most obvious example of such non-cash expenses is depreciation. By debiting the amount of depreciation in the Income Statement, we lower the amount of …

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