Question

Which cashflow format is likely to be more applied for analytical purpose?

Answer 1

An enterprise should prepare a cash flow statement and should present it for each period for which financial statements are presented. Users of an enterprise’s financial statements are interested in how the enterprise generates and uses cash and cash equivalents.
A cash flow statement, when used in conjunction with the other financial statements, provides information that enables users to evaluate the changes in net assets of an enterprise, its financial structure (including its liquidity and solvency), and its ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities.
Cash flow information is useful in assessing the ability of the enterprise to generate cash and cash equivalents and enables users to develop models to assess and compare the present value of the future cash flows of different enterprises.
IN INDIA, Cash flow statement is prepared according to ACCOUNTING STANDARD 3.(AS3)
There is basically two methods or formates are given in AS3 for the prepration of cash flow statement.
1.direct methoed
2.indirect method
both the methods has separate format for the preparation of cash flow.
INDIRECT METHOD is likely to be more applied for analytical purpose.
Here I am attching an image of cash flow statement format of INDIRECT METHOD for your better understanding.

$ XXX Cash Flow Statement (Indirect Method) Particulars $ A cash flow from cebarting Activities: Net profit befare laxation and Extra ordinary Items Adjustment for! Depreciation Foreign exchange loss Poteliminary expenxes Written-off Loss on tale Fixed asset XX XX XX Interest Expenses XX XX Interest Income Dividend Income (xx) CXX) (KX) X X X XX XX XX Profit on sale of fixed assets en mening perfit beheue Working Capital Decrease ) (Increaseleis Sunday debtory Decalearc/(mmertease) in Imuentosies Increase/Decreane) is Lunday Creditors Gash Generated from orations Income Yax paid cash flow before extra ordinary Itemne Poroceeds foon earthquake disaster Settelment. Net cash from operating Activities XXX XX XXX X X


I dividend Net Cash Incoren or decolean in LT (8) Cash Liow from Soveting Activities Purchase of fixed assets Proceeds from sale of equipment (xx) XX XX XX Interest deceived Dividend received Net cash poovided/cured) by Activities XXX XX Xx proceeds (C) Cash flow from financing Activities Proceeds from Istvance of g Share Cepital from Long-term borrowings Repayments of long-term borrowings Redemption og preference share cobital (xx} borrowings (xx) Net Ceh provided (omat) ay financing decision cristh & cash equivalente (A +B+C) Cash & Cash equivalent at the be beginning of the period Cash & Canh equivalents at the end the period Payment of Interest on Payment of (xx) XXX XXX XX . XXX g