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

Bank reconciliation statement

what is bank reconciliation statement.
                                                       a statement which is made to correct and reconcile the balances of bank statement and cash book is bank reconciliation statement.

 purpose of bank reconciliation statement  
                                                                    the main purpose of bank reconciliation statement is to check how many amount is left in our  bank account to issue the check
Reasons of disagreement of bank statement and cash book.
                                                                                   There are six reasons.


1. Deposit in Transit:

The cheques which we have deposited in the bank but not yet have recorded by the bank is a cause of difference between the balance of cash book and bank statement.

2. Outstanding cheques:

The cheques we have issued but not yet have been presented to bank are also a cause of disagreement between the two balances.

3. Bank Adjustments:

If the bank have credited or debited the customer account erroneously then it is also a cause of disagreement of balances between cash book and bank statement.

4. Book Adjustments:

If the customer makes a mistake in cash book while writing the amount or omitting to record the amount then there is a need of bank reconciliation statement.

5. NSF Cheques:

If there is no amount in the bank account the cheque returns dishonor and these cheques are called NSF cheques. These cheques lead to difference between cash book and bank statement.

6. Amount Collected by Bank:

If the cash or cheque is directly collected by the bank and customer has no information about it then it is also a reason of disagreement of balances  between cash book and bank statement.

                

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