The balance sheet represents the financial position of the firm

on the last day of accounting period.

Income statement represents profit or loss during the period. The revenue or the profit does not reflect the cash inflows as debtors may pay later.

Also non cash expenses like depreciation are shown. Thus the profit or loss does not bear any direct relationship with cash inflow or outflow.

Cash flow is essentially the movement of money into and out

of the business; it's the cycle of cash inflows and cash

outflows that determine the business' liquidity & solvency.

It is the statement which indicates sources of cash & application of cash. Also know as Where Got Where Gone

statement

Cash flow analysis is the study of the cycle of your

business' cash inflows and outflows, with the purpose of

maintaining an adequate cash flow for your business, and to provide the basis for cash flow management.

It helps the management to review its investing, operating

& financing decisions.

Cash flow statement is the third major statement of

the company.

Many things like dividends, interest & debt repayment to lenders, payment to employees & suppliers & taxes depend upon cash flow.

To purchases. To wages To salaries To office expenses To selling & distribution expenses To depreciation To net profit

5,00,000 30,000 50,000 50,000 15,000 10,000 1,45,000

8,00,000 By sales (50 % sales is on credit)

Net income = 1,45,000 where as net cash outflow = 2,45,000

It is mandatory for enterprises having

turnover of more than Rs. 50 crore in FY or

Shares of which are listed in stock exchange in India or outside India.

The enterprises which are in the process of listing their equity or debt securities as evidenced by BOD resolutions.

Includes revenue producing activities i.e. sale of goods & rendering of services.

Non- operating incomes & expenses are excluded.

E.g. cash receipts form sale of goods, from royalties,

fees, commission & insurance company. Cash payment to supplier, to employees & to insurance company.

Relate to acquisition & disposal of long term assets & other

investments. It also includes cash payments or receipts to

acquire or dispose.

It comprises activities related to capital expenditure incurred with the purpose to generate future earnings as cash flows. E.g. purchase /sale of fixed assets, interest & dividend

received on the investment made.

Represent the changes in size & composition of shares/ owners capital & debt of the enterprise.

E.g. proceeds from issue of share capital/ debentures

and redemption of share capital& debentures, payment

of interest & dividend to debenture holders & shareholders.

Classify cash flows in three types

1.

2.
3.

Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities.

2008 B.R Stock Debtors Prepaid Exp Accrued Income Creditors Outstanding Expenses 80 200 400 90 80 200 60

2009 60 300 350 80 70 220 75

B.P
Cash Income received in advance Overdraft Profit

70
100 8 50

60
150 10 60 150

Profit : 150 Adjust : Outstanding exp + 15, Prepaid exp. + 10, Accrued income +10, Creditors +20 income recd. In advance +2 BP 10 Debtors + 50 Stock -100 BR + 20 =167

Information (2009) : Profit : 1500, Loss on sale of fixed assets : 100, Depreciation : 90, Preliminary Exp. Written off : 50, Provision for tax : 100, Transfer to reserve : 100, Intangible assets written off : 50, Discount on issue of shares written off : 10, Gain on sale of fixed assets : 200,

Profit : 1500 : Adjust : Loss on sale of fixed assets : + 100, Depreciation + 90, Preliminary exp. + 50, Prov. For tax : + 100, Profit transfer to reserve + 100, Intangible assets written off : + 50, Discount on issue of shares written off :: + 10, Gain on sale of fixed assets : - 200 = 1500+300 = 1800 answer

Information in (2008,2009) : Share (200, 300) Premium (0,10), Preference share (100,50), 15% debenture (150, 250), Reserve (100,250), current liabilites (50,80), fixed assets (400,650), Investment(30,50), Cash (30,42.5), Current assets (120,160), Discount on Debentures (20,15) Preference share premium paid in 2009@ 5%, Interim dividend paid 30, Machine of book value 50 was sold for 30 in 2009. Dep. Charged 50. debentures issued at 10% discount

Profit : 150 Adjust : Depreciation : +50, Loss of sale of assets : + 20, current liabilities : + 30, current assets 40 , dividend + 30 Premium preference share paid : +2.5, discount on debenture +15 =257.5

Cash flow from Investment purchase of fixed assets -350, investment 20, sale of machine : + 30 total : - 340 Cash flow from Financing capital : +110, Debentures +90, Preference share : -52.5, Dividend : - 30, Interest on debentures : -22.5 total = 95

Closing balance : 650 add depreciation +50, add sale + loss 50, less opening balance 400 purchase = 350

Opening cash : 30 add cash from financing : 95 less cash for investing : 340 add cash from operations + 257.5 closing balance = 42.5

Opening stock: 80, Cash purchase : 240, Credit purchase : 160, Wages paid: 30, Outstanding wage : 6, gross profit 84, cash sales 250, Credit sales : 250, Closing stock : 100, Salaries paid 33, Outstanding salary 3, Loss on sale of machinary 4, Commission recd. 10, Net profit 54.

Profit : 54 add :credit purchase 160, wages outstanding : 6, outstanding salaries 3, loss on sale of machinary :4 less : credit sales : 250, increase in current assets (stock ) 20 net cash from operations : -43

Cash receipts etc. : cash sales : 250, commission received : 10, Cash payments : cash purchase : 240, wages paid : 30, salaries paid : 33, net cash from operations : - 43

Commission received is related to business of the organisation.

Furniture (20,36), depreciation on furniture (6,9), capital (50,75), loan (25,15), furniture costing 4 was sold for a profit of 3. Depreciation on furniture during the year 5,

Capital : +25 Loan : - 10, net cash flow from financing : +15

Cash inflow : Sale of furniture : 7, cash outflow : purchase of furniture : 20 net cash flow from investing : - 13

Credit total : closing stock : 36, sale : 7 less debit total : p& l (profit on furniture) : 3, opening stock : 20 difference is purchase of furniture : 20

Data of (2008,2009) debtors (10,12), provision for doubtful debt (1,1.2), BR (4,3), BP (5,6) creditors (8,9), Inventory (5,8), short term investment (10,12), outstanding exp (1,1.5), prepaid expenses (2,1), acrued income (3,4), income received in advance (2,1) profit in 2009 was 10 after depreciation of 2

Profit : 10 adjustments : depreciation +2, debtors -2, creditors +1, BR + 1, BP +1, inventory -3, outstanding exp +.5, prepaid exp + 1, acrued income 1, income received in advance 1, short term investment - -2, net cash flow from operations : 7.5 answer

Income statement for 2009 : sales 4000, cost of sales 3100, depreciation 96, salaries 380, operating expenses : 120, provision for tax 120, Profit on sale of machinary 20, dividend paid 115, profit 204 balance sheet (2008,2009) land (77,153), building (576, 920), cash (96,69), debtors (268,290), stock (420,150), advanances (12, 14), capital (576, 710), P&L (242, 204), creditors (382,374), outstanding expenses (38,76), income tax payable (19,21), depreciation (192, 211) cost of equipment sold : 115

PROFIT : 204 ADJUSTMENTS : Stock + 270, debtors -22, Advances -2, creditors 8, outstanding exp + 38, income tax payable +2, depreciation +96, sale of equipment -20, Provision for tax + 120, net cash flow = 678

Land : - 76, sale of equipment +58, purchase of equipment - 555 net : - 573

Capital +134, divident paid :- 115, net cash flow : 19

Opening balance 96 Cash from operating 678 cash from financing 19 cash from investing -573 closing balance 115

Difference in opening and closing balance :344 depreciation added : 96 total : 440 add equipment sold : 115 = 555 thus building & equipment purchased must be 555.

Difference of opening and closing balance : 19 depreciation charged during the year 96 difference : 77 , which is due to the sale of equipment