Cash flow statement

The statement which show flow of cash (inflow and outflow). In the business during accounting period is called cash flow statement.

Introduction of cash flow statement.

Cash flow statement is very important for every company. It is also one of very important for financial statement. It required for companies to provide information to investors, creditors, and other that is in compliance with generally accepted accounting principles.

Purpose of cash flow statement.

 The objective of Cash flow statement is to provide information about payments and collection in accounting period.

Methods of cash flow statement.

Two method of cash flow statement.

1. Direct method.

2. Indirect method.

Parts of cash flow statement.

1. Operating activities.

2. Investing activities

3. Financing activities.

Operating activities

Those activities which show the effect of cash on revenue and expense.

CASH RECEIPTS

Collections from customers for sales of goods and services 

Interest and dividends receives

CASH PAYMENTS

Payment to suppliers of merchandise and services, including payments to employees

Payment of interest

Payments of income taxes

Investing Activities:

Those activities in which cash is invest on some investing activities active.eg plant asset tangible asset and investment is called investing activities.

CASH RECEIPTS

Cash proceeds form selling investment and plant and intangible assets

Cash proceeds from collecting principal amounts on loans 

CASH PAYMENTS

Payments to acquire investments and plant and intangible assets

 Amounts advanced to borrowers

Financing Activities

Cash flows classified as financing activities include the following items which come from transactions. Debt and equity financing

CASH RECEIPTS

Proceeds from both short term and long term borrowing 

Cash received from owners

CASH PAYMENTS

Repayment of amounts borrowed 

 Payments to owners such as cash dividends