Cash Flow Statement

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Guest

Guest (Querist)

18 December 2009 why we add increase in current asset and decrease in current liabilities & deduct decrease in current asset and increase in current liabilities FROM OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES aS pER AS-3??

Kindly explain with current asset example of prepaid expenses and current liability example of Outstanding expenses?

THank you.

Manish Soni

Manish Soni (Expert)
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18 December 2009 entry for increase in current assets:
Curent Assets a/c_______________Dr.
To Cash a/c
it means that there is cash outflow.
Reverse entry in the case of inflow..

Similarly in case of current liabilities:
Cash a/c_________________________Dr.
To Current Liabilities a/c
it means that there is cash inflow.
Reverse entry in the case of outflow.