Cash Flow Statement

Cash flow statement a financial statement that provide a summary of cash receipt and payments during the period. In one line it can be described as cash flow statement is summary of cash book of any organization.

Classification of Cash Flow

Cash flow statement classifies cash receipt and payments by operating, investing and financing activities.

  1. Operating Activities
  2. Investing Activities
  3. Financing Activities

Operating Activities:  Cash flow from operating activities is determined from the principal operating activities. Examples of operating activities are:-

  1. Receipt from sale of goods
  2. Receipt from commission and other operating activities
  3. Cash payment from purchase of materials and other inputs.
  4. Cash payment on account of wages and salaries.
  5. Cash payment and refund of taxes.

Positive net cash flow from operating activities is a key indicator of any organization’s ability to maintain its operating capacity.

Investing Activities : Cash flow from investing activities shows the ability of organization’s for future cash flow. Examples of cash flow from investing activities are:-

  1. Cash payment for purchase of fixed assets
  2. Cash receipt from sales of fixed assets
  3. Cash advance and loan made to third party and receipt from third party.

Financing Activities:Financing activities are these activities by which a organization’s ensure fund to run the enterprises. Examples of financing activities are as under:

  1. Cash receipt from issue of share capital
  2. Cash proceed from issue of debenture and long term and short term Borrowing.
  3. Payment for amount taken on loan.
  4. Interest payment to bank or other parties.

Format of Statement of Cash Flows        

The format may vary according to the nature of each organization. But the common format is as under:

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