COMPANY NAME Statement of cash flows Period covered Cash flows from operating ac

Question

COMPANY NAME Statement of cash flows Period covered Cash flows from operating activities (List of individual items) Net cash provided (used) by operating activities Cash flows from investing activities List of individual inflows and outflows) Net cash provided (used) by investing activities Cash flows from financing activities XxX (List of individual inflows and outflows) Net cash provided (used) by financing activities Net increase (decrease) in cash Cash at beginning of period Cash at end of period ??? John Smith, the owner-manager of Funny Business Pty Ltd, is unfamiliar with the statement of cash flows that you, as his accountant, prepared. He asks for further explanation. Required Write a brief presentation explaining the form and content of the statement of cash flows as shown in the figure above.

Explanation / Answer

Cash flow statement shows the cash receipt and disbursement showing how much money moved in or out of the company.

Cash flow statement has three main sections operating section, investing section and financing section.

Operating section shows the cash receipt and payment for normal course of business. This section can be prepared by both direct and indirect method. In direct method cash receipt and payment is specifically recorded whereas in indirect method adjustments are done to net income to reach the net cash generated by the operating activities.

Investing section includes the effect of purchase and disposal of long-term fixed asset and investments.

Financing section records the cash receipt or disbursement due to financial activities such as stocks issue, dividend payment, Bond issue, Bond payment etc.

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