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CASH FLOW STATEMENT – as per AS 3

CASH FLOW STATEMENT

As per Companies Act 2013, inclusion of Cash Flow Statement in the Financial Statement is mandatory provision for all the companies except some specified companies about which we will discuss later in the article. Our focus for this post will be

  1. Applicability of Cash Flow Statement
  2. Format for Cash Flow Statement
  3. Preparation technique for Cash Flow Statement

So without wasting any more time let’s start with the Applicability for preparation of Cash Flow Statement.

  1. Applicability for Preparation of CFS:

As per Companies Act, 2013 each & every company is mandatory to prepare the following:

Balance Sheet

Profit & Loss A/c

Cash Flow Statement

Statement for Changes in Equity

Explanatory note annexed

But some of the companies are eligible to get exemptions from preparation of CFS for the financial year if,

  1. It is a OPC i.e. One person Company
  2. It is a Dormant Company
  3. It is a Small Company. Here Small Company means a company who’s paid up capital is less than 50 Lacs or has turnover less than 2 Crores during the Financial Year. But such exemptions are not available to Subsidiary of a Holding company which has applicability to mandatory preparation of CFS.

CASH FLOW STATEMENT

 

2. Format of Cash Flow Statement

Format of Cash Flow Statement as per Accounting Standard – 3 DOWNLOAD
  1. Preparation technique for Cash Flow Statement

Step 1: Add/Less non-cash items which are already debited or credited in Profit & Less Account from the Profit before Tax.

Step 2: Add/Less changes in working capital from the outcome of Step 1. Increase in Current asset should be deducted & decrease in Current Asset should be added.

Similarly Increase in Current Liabilities should be Added & Decrease in Current Liabilities should be deducted.

Step 3: Deduct taxes paid during the year from outcome of Step 2. This will be your inflow/outflow from the operating activities.

Step 4: Find addition in Fixed Assets from depreciation chart and show it as an outflow. Secondly show outflow for investment during the year. If any asset is sold during the year then show the same as inflow.

Step 5: Show all the loans sanctioned during the year as inflow and repayment as outflow for cash flow from Financing Activities. Deduct Finance Charges debited in the profit & loss account which is added back during cash flow from operations.

Step 6: Add the inflow outflow of all the activities .i.e. from operations, investing activities & financing activities. Add opening cash balance with the result and you will get the closing balance of Cash.

That’s all for preparation of CFS. Keep Sharing.

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