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G. K.'s Way to Learn - Cash Flow

Gourav Kapoor (CA Final Student) (2977 Points)

01 March 2011

Referring to MY POST, I am hereby starting this thread for PCC/IPCC – Financial Management - Cash Flow

So friends, Lets Start……

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Gourav Kapoor (CA Final Student) (2977 Points)
Replied 02 March 2011

Simple way to learn Cash Flow :

Jus follow these steps :

1. Notice the dates of balance shet given in ques

2. Prepare statement of cash & cash equivalents in which we will consider three items:

- Cash

- Bank

- Short Term Investments

3. Prepare all ledger accounts which are given in ques and post journal enteries of the adjustments, if any except the following accounts:

- Direct Method

- Cash & Cash Equivalents

- Stock

- Indirect Method

- Cash & Cash Equivalents

- Stock

- Current Assets & Current Liabilities

4. Prepare P & L account

5. Pick up bank transactions and post them in cash flow statements categorized as Operating, Financing & Investing activities in the following format :

Operating Activities

- Direct Method

Cash Received from Customers
- Cash Sales	X
- Debtors Collection	X	X
Cash paid to suppliers & employees
- Cash Purchases	X
- Cash paid to suppliers	X
- Overhead expenses	X
- Administration expenses	X
- Selling & Distribution expenses	X	(X)
Cash generated from operations		X
(-) Tax paid		(X)
Cash flow before extra – ordinary items		X
Cash flow from/used in operating activities (A)		X

- Indirect Method

Net Profit before tax & EI		X
Adjustments
- Non Cash items	X
- Non Operating Items	X	X
Operating profit before working capital changes		X
(-) Increase in current assets		(X)
(+) Decrease in Current assets		X
(+) Increase in current liabilities		X
(-) Decrease in current liabilities		(X)
Cash generated from operations		X
(-) Tax paid		(X)
Cash flow before extra – ordinary items		X
Cash flow from/used in operating activities (A)		X

Investing Activities

Sale of fixed assets / Investments	X
Purchase of fixed assets / investments	(X)
Interest / Dividend Received	X
Cash flow from / used in investing activities (B)	X

Financing Activities

Issue of Equity / Pref. share capital	X
Redemption of Pref share capital / debt	(X)
Interest / Dividend paid	(X)
Cash flow from / used in financing activities (C)	X