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Presented by:
Hitesh Baid
Classification of Business
Activities : Inflow and
Outflow of Cash
Operating Activities
Cash Inflow
1)
2)
3)
4)
Cash Sales
Received from Debtor
Commission & Fees
Royalty
Cash Outflow
1)
2)
3)
4)
5)
6)
Cash Purchases
Payment to Creditors
Cash Operating Expenses
Payment of Wages
Income Tax
Manufacturing Expenses
Classification of Business
Activities : Inflow and
Outflow of Cash
Investing Activities
Cash Inflow
1)
2)
3)
4)
5)
Cash Outflow
1) Purchase of Fixed Assets
2) Purchase of Investments
3) Working Capital
Classification of Business
Activities : Inflow and
Outflow of Cash
Financing Activities
Cash Inflow
Cash Outflow
1) Payment of Loans
2) Redemption of Preference
Shares
3) Payment of Dividends
4) Interest Paid
5) Repayment of Finance/
Lease Liability
Cash Flow
Funds Flow
Significance
Schedule of
Changes in
Working Capital
Schedule of changes in
Working capital is
Prepared separately
Basis of
Accounting
Causes of
Variation
Preparing a Statement of
Cash Flows
Use net operating income as the starting
point to get net operating cash flow
Add back any non-cash expense
(Example - Depreciation)
Net Cash Flow = Cash Inflow - Cash Outflow
Net Operating Cash Flow = Income after Taxes
+ Depreciation
Preparing a Statement of
Cash Flows
Order of Presentation:
1.
Operating activities.
2.
Investing activities.
3.
Financing activities.
Direct Method
Indirect Method
Amount
(Rs.)
Amount
(Rs.)
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Amount
(Rs.)
Amount
(Rs.)
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
XXX
Book Approach
Income Statement
Revenues
Expenses
Cost of Goods Sold
Depreciation*
Operating Expenses
Taxable Income
Income Taxes
Net Income
Operating
+
-Capital Investment
+Salvage Proceeds
-Gain Tax
-Working Inv Cap
+Working Cap Recovery
Investing
+Borrowed Funds
-Repayment of Principal
Financing
End of Presentation
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Thank You