What is Cash Flow Statement? How it is prepared?

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Accepted Answer

Cash flow statement is an inflow and outflow of cash in an organisation other than any notional entries reported in financial statements and provides the cash liquidity presents in an organisation thtough out the period

There are maily three activities in cash flow statement

Operating activities: Shows the operational cashflows generated in ordinary course of business
Investment activities: Shows the cash inflow and outflow of any assets sold or purchased in the business
Financing activities: Shows the cash inflow and outflow of any loans raised or dividend/interest paid.

Accepted Answer

The Cash Flow Statement is a financial statement that provides information about the cash inflows and outflows of a company over a specific period. It helps assess the liquidity and financial health of a business by showing how cash is generated and used.

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What is cash statement and how it is prepared

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I believe you meant to ask about the Cash Flow Statement. The Cash Flow Statement is a financial statement that provides information about the cash inflows and outflows of a company over a specific period. It helps assess the liquidity and financial health of a business by showing how cash is generated and used.

The preparation of a Cash Flow Statement typically involves three main components:

Operating Activities: This section records cash flows from the company's core operations, such as revenue from sales and payments to suppliers, employees, and other operational expenses. It involves adjustments for non-cash items like depreciation and changes in working capital.
Investing Activities: This section covers cash flows related to investments in long-term assets, such as the purchase or sale of property, plant, and equipment, investments in other companies, or the acquisition or sale of marketable securities.
Financing Activities: This section includes cash flows related to the company's financing activities, such as issuing or repurchasing stock, issuing or retiring debt, payment of dividends, or borrowing and repayment of loans.

To prepare a Cash Flow Statement, you typically follow these steps:

Start with the net income from the company's income statement.
Adjust net income for non-cash items (e.g., depreciation and amortization) and changes in working capital (e.g., changes in accounts receivable, accounts payable, and inventory).
Analyze cash flows from investing activities, including the purchase and sale of assets or investments.
Analyze cash flows from financing activities, such as issuing or repurchasing stock, paying dividends, or taking on or repaying debt.
Summarize the cash flows from operating, investing, and financing activities to arrive at the net increase or decrease in cash during the period.
Include the beginning cash balance and calculate the ending cash balance.

What is Cash Flow Statement? How it is prepared?

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