NCERT Book Class 12 Accountancy (Part 2) Chapter 6 Cash Flow Statement

Cash Flow Statement 6

T iill now you have learnt about the financial
statements being primarily inclusive of Position
Statement (showing the financial position of an
enterprise as on a particular date) and Income
Statement (showing the result of the operational
activities of an enterprise over a particular period).
There is also a third important financial statement
known as Cash flow statement, which shows inflows
and outflows of the cash and cash equivalents. This
statement is usually prepared by companies which
comes as a tool in the hands of users of financial
information to know about the sources and uses of
cash and cash equivalents of an enterprise over a
period of time from various activities of an
LEARNING OBJECTIVES
enterprise. It has gained substantial importance in
the last decade because of its practical utility to the
After studying this chapter, users of financial information.
you will be able to :
Financial Statement of companies are prepared
• state the purpose
and preparation of
following the accounting standards prescribed in
statement of cash flow the companies Act, 2013. Accounting Standards
statement; are notified under section 133 of the Companies
• distinguish between Act, 2013 vide Accounting Standards Rules, 2006
operating activities, and are mandatory in nature. Companies Act, 2013
investing activities and also specifies that if the accounting standards are
financing activities; not followed, financial statements will not be true
• prepare the statement and fair, which is a quality of financial statement.
of cash flows using Financial Statements are defined in Companies Act,
direct method;
2013 (Section 2 (40)] and includes Cash Flow
• prepare the cash Statement prepared in accordance with Accounting
flow statement using
indirect method.
Standard- 3 (AS-3)- Cash Flow Statement.
A cash flow statement provides information
about the historical changes in cash and cash