= Previous year’s amount is deducted from “Cash generated from operations”. = Current Year’s amount is added to the Net Profit. If given in adjustment : Added to the Net Profit Declaration of interim dividend does not require the approval at the AGM. Interim dividend: It is a dividend that is declared by the Board of Directors in between the financial year, provided it is allowed by the company’s Articles of Association.But dividend paid is a financing activity for all. Till the time it is approved at the AGM it is not a liability.ī) Dividend /Interest received by financial institutions is an operating activity for them. Proposed dividend – It is proposed by Board of directors and approved by the shareholders in annual general meeting before it becomes due for payment.(Cash in hand, Cash at Bank, Marketable securities/Short- Term deposits, Current Investments)ĬASH & CASH EQUIVALENTS AT THE END OF THE PERIOD Adjustments: Less: Net Income tax Paid (Tax – Refund) (PY)Īdd: Interest and dividend received (Non-financial co.)Īdd : Cash & Cash equivalents at the beginning of the period OPERATING PROFIT BEFORE WORKING CAPITAL CHANGESĪdd: Decrease in Current assets (Except Cash & C.E.) I : Interest on borrowings/ debentures/ Bank overdraftĭ: Decrease in Provision for doubtful debts W: Goodwill, Patents, Trademarks, Amortised/Written Off NET PROFIT BEFORE TAX & EXTRAORDINARY ITEMS Less : Extraordinary Income (If already added) P: Proposed dividend (Paid during the year)Īdd: Extraordinary Expenses (If already deducted) Extraordinary Expense: Added to Net Profit Deducted from “Cash Generated”Īdd: T: Provision for Taxation (Closing Balance/CY).Extraordinary Income: Deducted from Net Profit Added to “Cash Generated”.Refund of Tax: Added to Net Profit Deducted from “Cash Generated”.are bad debts recovered, claims from insurance companies, winning of law suits, lottery etc. If legal dispute has been favourable decided, the compensation received will be shown separately as an extra ordinary cash inflow from operating activities. They have to be disclosed in the cash flow statement under the relevant heading separately. They do not relate to the regular course of business of the firm. There may be some items appearing in the financial statement which are of extra ordinary nature. Refund of taxes Extraordinary Transactions
Goodwill/patents/trademarks written off (amortised), These transactions are also not taken into account while preparing CFS. These are the transactions in which neither cash nor cash equivalents are involved. Helps in assessing Liquidity and solvency.They also include payment of interest and dividend on bonds and shares respectively. Financing activities – These activities result in change in the size and composition of share capital and borrowed funds like debentures and bonds of a company.They also involve the receipt of interests and dividends on investment. Investing activities – These activities include the acquisition and disposal of investments and fixed assets.These activities include business transactions which lead to earning of profit. These are principal revenue generating activities of the business. Operating activities – These are the activities involved in the day to day operation of the business.AS-3 requires a Cash Flow Statement to be prepared and presented in a manner that it shows cash flows from business transactions during a period classifying them into three activities: Cash Flows:Ĭash flows are inflows and outflows of cash and cash equivalents. Examples – Treasury Bills, Commercial Papers, Preference Shares redeemable within three months from the date of purchase. An investment is treated as cash equivalents only when it has a short maturity period of, say, 3 months or less from the date of acquit ion/purchase. These are highly liquid short-term investments which can be converted into certain known amount of cash without any risk of loss in value. It means cash in hand and at bank in demand deposits which can be used instantly. Cash Flow Statements shows inflows (receipts) and outflows (payments) of cash and cash equivalents of an enterprise during a specified period of time.
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