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Lesson Posted on 01 Apr Tuition/Class XI-XII Tuition (PUC)/Accounts

Cash Flow Statement (CFS)

Anjali Yadav

I am a chartered accountant by profession. I qualified CA in 2011 in FIRST ATTEMPT. I am teaching 11th,...

CASH FLOW STATEMENT Marks: 8 (Eight) As prescribed by the Accounting standard-3 (AS-3), there are two methods which can be used to prepare cash flow statements: Indirect method Direct method (Not applicable for CBSE class XII) Whichever method be used, the end result under all three activities... read more

CASH FLOW STATEMENT

Marks: 8 (Eight)

 

As prescribed by the Accounting standard-3 (AS-3), there are two methods which can be used to prepare cash flow statements:

  1. Indirect method
  2. Direct method (Not applicable for CBSE class XII)

Whichever method be used, the end result under all three activities i.e. operating, investing and financing will be the same.

THUMB RULE: CASH FLOW IS PREPARED FOR CASH TRANSACTIONS ONLY. ALL NON-CASH TRANSACTIONS ARE IGNORED AND REMOVED IF INCLUDED IN ANY ITEM.

 

Preparation of CFS under Indirect method:  

 

Particulars

Amount

Learning Efforts allocation

Operating Activities (a)

25000

60%

Investing Activities (b)

50000

30%

Financing Activities (c)

75000

10%

Net increase in cash and cash equivalents (d=a+b+c)

150000

100%

Cash and cash equivalents and the beginning of the period (e)

30000

 

Cash and cash equivalents and the end of the period (f=d+e)

180000

 

 

 

A.   Operating Activities

The cash flow from operating activities are derived under two stages;

  1. Calculating the operating profit before changes in working capital
  2. The effect of changes in working capital

 Stage 1: Operating profit before changes in working capital can be calculated as  

follows:

Net profit before Tax and extra ordinary Items

xxx

 

Add: Non-cash and non-operating Items which have already been debited to profit  

and Loss Account like;

   

Depreciation

xxx

 

Amortisation of intangible assets

xxx

 

Loss on the sale of Fixed assets

xxx

 

Loss on the sale of Long-term Investments

xxx

 

Provision for tax

xxx

 

Dividend paid

xxx

xxx

Less: Non-cash and Non-operating Items which have already been credited to     

Profit and Loss Account like

   

Profit on sale of fixed assets

xxx

 

Profit on sale of Long term investment

xxx

xxx

Operating profit before working Capital changes

 

xxx

 

Stage 2: Effect of changes in Working Capital is to be taken into as follows:

Current Assets

  1. An increase in an item of current assets causes a decrease in cash inflow because cash is blocked in current assets
  2. A decrease in an item of current assets causes an increase in cash inflow because cash is released from the sale of current assets

Current Liabilities

  1. An increase in an item of current liability causes a decrease in cash outflow because cash is saved
  2. A decrease in an item of current liability causes an increase in cash outflow because of payment of the liability

 

Thus, in a nutshell

 

Cash from operating activities =

  Operating profit before working capital changes

+ Net decrease in current assets

+ Net Increase in current liabilities

 – Net increase in current assets

– Net decrease in current liabilities

 B. Investing Activities

The cash flow from investing activities is derived by adding all the cash inflows from the sale or maturity of assets and subtracting all the cash outflows from the purchase or payment for new fixed assets or investments.

Cash flow arising from Investing activities typically are:

  1. Cash payments to acquire Fixed Asset
  2. Cash receipts from disposal of fixed asset
  3. Cash payments to acquire shares or debenture investment
  4. Cash receipts from the repayment of advances and loans made to third parties

 Examples of Cash inflow from investing activities are:

  1. Cash sale of plant and machinery, land and Building, furniture, goodwill etc
  2. Cash sale of investments made in the shares and debentures of other companies
  3. Cash receipts from collecting the Principal amount of loans made to third parties

Examples of Cash outflow from investing activities are:

  1. Purchase of fixed assets i.e. land, Building, furniture, machinery etc
  2. Purchase of Intangible assets i.e. goodwill, trademark etc
  3. Purchase of shares and debentures
  4. Purchase of Government Bonds
  5. Loan made to third parties   

C. Financing activities

Cash flows from financing activities are the cash paid and received from activities with non-current or long-term liabilities and shareholder’s capital.

Cash flow arising from Financing activities typically are:

  1. Cash proceeds from the issue of shares or other similar instruments
  2. Cash proceeds from the issue of debentures, loans, notes, bonds, and other short-term borrowings
  3. Repayment of the amount borrowed

Examples of cash inflow from financing activities are:

  1. Issue of Equity and preference share capital for cash only
  2. Issue of Debentures, Bonds and long-term note for cash only

Examples of cash outflow from financing activities are:

  1. Payment of dividends to shareholders
  2. Redemption or repayment of loans i.e. debentures and bonds
  3. Redemption of preference share capital
  4. Buyback of equity shares

 

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Lesson Posted on 16 Mar Tuition/Class XI-XII Tuition (PUC)/Accounts

Partnership Accounting

Akhil Mittal

I have been teaching accounts to class 11 and 12th students (CBSE) from past 4 years. Taught students...

In partnership, accounting starts from transferring “Net profit” figure from P&L account to “P&L Appropiation a/c”. Below are accounting entries to be made. For transfer of balance in P&L amount: ( Profit transferred) Profit & Loss account Dr. ... read more

In partnership, accounting starts from transferring “Net profit” figure from P&L account to “P&L Appropiation a/c”. Below are accounting entries to be made.

  • For transfer of balance in P&L amount: ( Profit transferred)

Profit & Loss account

Dr.

 

 

Profit & Loss Appropriation account

Cr.

 

 

  •  For Interest on Capital charged to P&L appropriation account:

Profit & Loss Appropriation account

Dr.

 

 

  To Interest on Capital

Cr.

 

 

(Being interest on capital trf. To P&L Appropriation account)

 

 

 

 

  • For Interest on Capital

Interest on Capital

Dr.

 

 

  To Partners Capital A/c

Cr.

 

 

( Being interest on capital @ allowed)

 

 

 

 

  • For salary or commission payable to a partner:

Partner’s Salary/Commission A/c

Dr.

 

 

  To Partners Capital A/c

Cr.

 

 

(Being salary/commission payable)

 

 

 

 

 

 

 

Profit & Loss Appropriation account

Dr.

 

 

  To Partner’s Salary/Commission A/c

Cr.

 

 

(Being salary/commission trf. To P&L appropriation account)

 

 

 

 

  • For transfer of reserve:

Profit & Loss Appropriation account

Dr.

 

 

  To Reserve A/c

Cr.

 

 

(Being reserve created)

 

 

 

 

  • For interest on drawing:

Partner’s Capital account

Dr.

 

 

  To Interest on Drawing A/c

Cr.

 

 

(Being interest on drawing charged @__ %p.a.)

 

 

 

 

 

 

 

Interest on Drawing A/c

Dr.

 

 

  To Profit & Loss Appropriation account

Cr.

 

 

(Being interest on drawing trf. To P&L appropriation account).

 

 

 

 

  • For transfer of credit balance of profit and loss account appropriation account:

Profit & Loss Appropriation account

Dr.

 

 

  To Partner’s Capital account

Cr.

 

 

(Being profit distributed among partners)

 

 

 

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Lesson Posted on 08/06/2019 CBSE/Class 11 CBSE/Class 11/Commerce Tuition/Class XI-XII Tuition (PUC)/Accounts

Meaning and Objectives of Book-Keeping - Class 9/Class11

Rajiv Vadera

I am MBA Finance. I believe in conceptual learning and not just theoretical

Bookkeeping and Accountancy
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Lesson Posted on 04/02/2019 CBSE/Class 11/Commerce CBSE/Class 11/Commerce/Accountancy Tuition/Class XI-XII Tuition (PUC)/Accounts +1 CBSE/Class 11/Commerce/Accountancy/Unit 1-Financial Accounting(Part A)Theoretical Framework less

Difference between Book-Keeping and Accounting/Accountancy, Class 11

Rajiv Vadera

I am MBA Finance. I believe in conceptual learning and not just theoretical

Helpful for NCERT/CBSE, State Board, ICSE Class 9, ISC, IGCSE/GCSE
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Lesson Posted on 20/01/2019 CBSE/Class 11/Commerce/Accountancy Tuition/Class XI-XII Tuition (PUC)/Accounts

Fictitious Assets - Class 11/12, Book-Keeping and Accountancy, Basic Accounting Terms

Rajiv Vadera

I am MBA Finance. I believe in conceptual learning and not just theoretical

Useful for - NCERT/CBSE, ICSE/ISC, IGCSE/GCSE, State Boards
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Lesson Posted on 14/01/2019 Tuition/Class XI-XII Tuition (PUC)/Accounts

Financial Statement Analysis - Objectives and Limitations, Class 12 Accounts

Rajiv Vadera

I am MBA Finance. I believe in conceptual learning and not just theoretical

NCERT/CBSE, ICSE/ISC, IGCSE/GCSE, State Board-
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Lesson Posted on 28/08/2018 Tuition/Class XI-XII Tuition (PUC)/Accounts CBSE/Class 11/Commerce/Accountancy Tuition/BBA Tuition/Management Accounting

Current Ratio - Ratio Analysis, NCERT Class 12

Rajiv Vadera

I am MBA Finance. I believe in conceptual learning and not just theoretical

Book-Keeping and Accountancy - Balance Sheet Ratio, Liquidity Ratios, ICSE/ISC, IGCSE/GCSE, State Board, CBSE-
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Answered on 27/07/2018 Tuition/Class XI-XII Tuition (PUC)/Accounts

Bipin Kumar Thakur

Crash Course Expert with 15 years of teaching experience in commerce

Minimum 500 per hour to 1500 per hour maximum for individual classes. In batches it would cost ?14000 to 25000 per annum.
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Lesson Posted on 19/06/2018 Tuition/Class XI-XII Tuition (PUC)/Accounts CBSE/Class 11/Commerce/Economics Tuition/BBA Tuition/Micro and Macro Economics

Commerce

Yash Dhiman

Spirituality and Experience This chapter focuses on the spiritual experiences and the various groups...

I can teach 11/12 th commerce all subjects only in kanpur. Teaching for 4 years.
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Answered on 06 Feb CBSE/Class 11/Commerce/Accountancy Tuition/Class XI-XII Tuition (PUC)/Accounts CBSE/Class 11/Commerce/Business Studies

Anyone looking for an Accounts and Business Studies teacher in East Delhi? I am a Chartered Accountant... read more

Anyone looking for an Accounts and Business Studies teacher in East Delhi? I am a Chartered Accountant and am willing to provide Teaching Services.

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Aquib Sultan

Looking for tutors to work as freenlancers in renowned institute offering online classes.
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