Cash flow Statement

The inflow and out flow of cash which occur a particular period is called cash flow. A cash flow
statement is the financial statement that measures the cash generated or used by a company in a
given period. Cash flow statement is a statement which shows inflows and outflows of the cash and
cash equivalents. This statement is usually prepared by companies’ which comes as a tool in the
hands of users of financial information to know about the sources and uses of cash and cash
equivalents of an enterprise over a period of time from various activities of an enterprise. A cash
flow statement is a financial statement that provides aggregate data regarding all cash inflows a
company receives from its ongoing operations and external investment sources. It also includes all
cash outflows that pay for business activities and investments during a given period.

A cash flow statement is a statement that reports the cash receipts and cash payments of a
organization during a particular period.

Objective of Cash flow Statement

The main objective of preparing cash flow statement for a particular accounting period is to present
information regarding inflow and outflow of cash It also fulfills the following objectives;

• Ensuring future positive cash flow of particular concern.

• Ensuring capacity of an organization to pay a dividend.
• Identifying non-cash items ensuring cash income and expenses of a concern.
• Comparing various items of the current year with those of last year.

Knowing cash and cash equivalent and outsource inflow of a concern for a particular period.
Moreover, cash flow statement plays an important role in planning and controlling future course of
action of a business concern.
It also helps shareholders and potential investors in taking short-term and long-term decisions.

Sections Cash Flows: A statement of cash flows comprises of three sections:

Cash Flows from Operating Activities; This section includes cash flows from the principal
revenue generation activities such as sale and purchase of goods and services. Cash flows from
operating activities can be computed using two methods. One is the Direct Method and the other
Indirect Method. Elements you need to complete on section one are earnings before interest and
taxes (EBIT) and depreciation. Depreciation is a planned reduction in the value of a fixed asset as it
is used. For the purpose of cash flows from operations, add all of your assets' depreciation expenses
together to arrive at total depreciation expenses.

Cash Flows from Investing Activities; Cash flows from investing activities are cash in-flows and
out-flows related to activities that are intended to generate income and cash flows in future. This
includes cash in-flows and out-flows from sale and purchase of long-term assets. This section is a
summation of the investment gains or losses a company encountered in a period. It includes
purchasing or selling fixed assets, such as a plant or equipment.
Cash Flows from Financing Activities; Cash flows from financing activities are the cash flows
related to transactions with stockholders and creditors such as issuance of share capital, purchase of
treasury stock, dividend payments etc. The sale of company stock for financing can be recorded in
this section, along with repurchase of stock, dividend payment, debt repayments (as long as it is for
a financing activity). Any payment going out is negative cash flows, and any payments received are
positive cash flows.
 Company ABC Ltd.
Cash Flow Statement
For the Year Ended Dec 31, 20B

Cash Flows from Operating Activities: Taka Taka

Operating Net Income / Net profit** xxx
Add:
Depreciation and written off xx
Loss on Sale of fixed assets xx
Increase in provision for bad debts xx
Increase in current liabilities xx
Decrease in current assets xx
Less:
Profit on Sale of fixed assets xx
Decrease in provision for bad debts xx
Decrease in current liabilities xx
Increase in current assets xx
Cash flow from operations Activities xxxx
Cash Flows from Investing Activities:
Purchase of fixed assets (use)
Proceeds from sale of fixed assets (source)
Net cash used in investing activities xxxx
Cash flows from financing activities
Proceeds from issuance of common stock/Share (source)
Proceeds from issuance of long-term debt(source)
Dividends paid (use)
Tax paid (use)
Net cash used in financing activities xxxx
Net Change in Cash xxxx
Beginning Cash Balance xxxx
Ending Cash Balance xxxx

Operating Net Income / Net profit**

Closing Balance of Profit (current year)................. ...xxx

Add: Income tax......xx

Dividends...... xx xx

Less: Opening Balance (previous year)................ xxx ..

Net profit before tax (current year)......... xxx

 ABC Company
Statement of Cash Flows (indirect method)
for the year ended 12/31/20X1

Line Item Derivation

Cash flows from operating activities
Net income From the net income line on the income statement
Adjustments for:
From the corresponding line items in the income
Depreciation and amortization
statement
From the change in the allowance for doubtful
Provision for losses on accounts receivable
accounts in the period
Gain/loss on sale of facility From the gain/loss accounts in the income statement
Change in trade receivables during the period, from
Increase/decrease in trade receivables
the balance sheet
Change in inventories during the period, from the
Increase/decrease in inventories
balance sheet
Change in trade payables during the period, from the
Increase/decrease in trade payables
balance sheet
Cash generated from operations Summary of the preceding items in this section

Cash flows from investing activities

Purchase of fixed assets Itemized in the fixed asset accounts during the period
Proceeds from sale of fixed assets Itemized in the fixed asset accounts during the period
Net cash used in investing activities Summary of the preceding items in this section

Cash flows from financing activities

Net increase in the common stock and additional
Proceeds from issuance of common stock
paid-in capital accounts during the period
Itemized in the long-term debt account during the
Proceeds from issuance of long-term debt
period
Itemized in the retained earnings account during the
Dividends paid
period
Net cash used in financing activities Summary of the preceding items in this section

Net change in cash and cash equivalents Summary of all preceding subtotals
 Company A, Inc.
Cash Flow Statement
For the Year Ended Dec 31, 201

Cash Flows from Operating Activities:

Operating Income (EBIT) $489,000
Depreciation Expense 112,400
Loss on Sale of Equipment 7,300
Gain on Sale of Land −51,000
Increase in Accounts Receivable −84,664
Decrease in Prepaid Expenses 8,000
Decrease in Accounts Payable −97,370
Decrease in Accrued Expenses −113,860
Net Cash Flow from Operating Activities $269,806

Cash Flows from Investing Activities:

Sale of Equipment $89,000
Sale of Land 247,000
Purchase of Equipment −100,000
Net Cash Flow from Investing Activities 136,000

Cash Flows from Financing Activities:

Payment of Dividends −$90,000
Payment of Bond Payable −200,000
Loan Payment ($10,000)
Loan Collection $5,000
Net Cash Flow from Financing Activities −290,000
Net Change in Cash $115,806
Beginning Cash Balance 319,730
Ending Cash Balance $435,536
 ABC Company
Statement of Cash Flows (indirect method)
for the year ended 12/31/20X1

Line Item Derivation

Cash flows from operating activities

Net income From the net income line on the income statement

Adjustments for:

Depreciation and amortization From the corresponding line items in the income statement

From the change in the allowance for doubtful accounts in the

Provision for losses on accounts receivable
period

Gain/loss on sale of facility From the gain/loss accounts in the income statement

Change in trade receivables during the period, from the

Increase/decrease in trade receivables
balance sheet

Change in inventories during the period, from the balance

Increase/decrease in inventories
sheet

Change in trade payables during the period, from the balance

Increase/decrease in trade payables
sheet

Cash generated from operations Summary of the preceding items in this section

Cash flows from investing activities

Purchase of fixed assets Itemized in the fixed asset accounts during the period

Proceeds from sale of fixed assets Itemized in the fixed asset accounts during the period

Net cash used in investing activities Summary of the preceding items in this section

Cash flows from financing activities

Net increase in the common stock and additional paid-in

Proceeds from issuance of common stock
capital accounts during the period

Proceeds from issuance of long-term debt Itemized in the long-term debt account during the period

Dividends paid Itemized in the retained earnings account during the period

Net cash used in financing activities Summary of the preceding items in this section

Net change in cash and cash equivalents Summary of all preceding subtotals