1. Cash flow statement

2. Computation of Cash flows from operations Indirect method

3. Illustration –Profit & loss Account for the year ended 31 st March, 2009 ParticularsRs.ParticularsRs. Administration expenses15,000Gross Profits45,000 Depreciation12,000Profit on sale of machinery4,000 Loss on sale of plant1,000 Goodwill w/off4,000 Provision of taxation5,000 Net profits12,000 49,000 Additional information31.03.0831.03.09 Stock22,00027,000 Debtors20,00019,000 Prepaid insurance1,0001,200 Creditors7,0008,000 Salaries o/s2,0002,500

4. Net profits as per profit and loss account1 Adjustment for non-cash expenses/incomes:2 Add: Non-cash expenses+ Deduct: Non-cash incomes- Adjustment for non-operating incomes and losses:3 Add: non-operating losses+ Deduct: non-operating incomes- Adjustment for working capital changes:4 Add: ↓ in current assets+ ↑ in current liability+ Deduct: ↑ in current assets- ↓ in current liability- Cash flows operating activities before payment of taxes 1 (+/-) 2, 3, 4 Tax payments- Cash flows operating activities after tax payments

5. Based on accounting equation Assets = Liabilities + Capital CA + NCA = CL + NCL + C Cash + AR + Inv + Mar. sec. + NCA = CL + NCL + C Cash= CL + NCL + C – AR – Inv – Mar. sec. – NCA CL + NCL + C have positive relation with cash – AR – Inv – Ppd exp – NCA have negative relation with cash

6. Illustration –Profit & loss Account for the year ended 31 st March, 2009 ParticularsRs.ParticularsRs. Administration expenses15,000Gross Profits45,000 Depreciation12,000Profit on sale of machinery4,000 Loss on sale of plant1,000 Goodwill w/off4,000 Provision of taxation5,000 Net profits12,000 49,000 Additional information31.03.0831.03.09 Stock22,00027,000 Debtors20,00019,000 Prepaid insurance1,0001,200 Creditors7,0008,000 Salaries o/s2,0002,500

7. Net profits12,000 Adjustment for non-fund and non-recurring expenses/incomes: Add: Depreciation 12,000 Goodwill written off 4,000 Provision for taxation 5,00021,000 Adjustment for gains/losses on non-current assets: Add: Loss on sale of plant 1,000 Less: Profit on sale of land (4,000)(3,000) Adjustment for working capital changes: Add: ↓ in debtors 1,000 ↑ in creditors 1,000 ↑ in salary o/s 5,00 Less: ↑ in stock (5,000) ↑ in prepaid insurance (2,00)(2,700) Cash from operating activities27,300

8. Cash from investing activities Add: Sale of non-current assets- Sale of long term investment- Dividend received- Interest received on long term investment- Deduct: Purchase of non-current assets- Purchase of long term investment- Cash from investing activities-

9. Illustration - Kanishk The following transactions occur at Kanishk Enterprises: Particulars Amount (Rs.) Purchased a machinery for1,50,000 Sold shares worth2,00,000 Received interest on debentures10,000 Received dividend on shares held20,000 Sold old machinery50,000

10. Solution Cash Flow from Investing Activities: Sale of Shares 2,00,000 Interest received 10,000 Sale proceeds of old machinery 50,000 Dividend received 20,000 2,80,000 Less: Outflow on account of machine purchase 1,50,000 Cash flow from Investing Activities 1,30,000 Kanishk Enterprises Cash Flow Statement

11. Cash from financing activities Add: Issue of share capital- Issue of debentures- Raising long term loans- Less: Redemption of debentures- Repayment of long term loans- Dividends paid- Interest paid- Cash from financing activities-

12. Cash from Financing Activities Supposing during the year Kanishk Enterprises has taken a loan of Rs 1,50,000 and paid an interest of Rs 15,000 thereon, how much is the cash flow from financing activities Cash flow from financing activities = Rs 1,35,000 (i.e., 1,50,000 - 15,000)

13. Preparing a Cash Flow Statement CASH FLOW STATEMENT Cash from operating activities1 Add: cash from investing activities2 Add: cash from financing activities3 Cash generated during the year1+2+3 Add: Cash at the beginning of the year4 (From BS) Cash at the end of the year1+2+3+4