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Here, you can learn the NCERT Class 12 Books Accountancy Part 2 Chapter 6- Cash Flow Statement. Moreover, you can get the links for other chapters to download the links.
Table of Content
The starting of the Chapter
Glimpses of the Chapter
- After studying this chapter, you will be able to-
- State the purpose and preparation of statement of cash flow statement
- Distinguish between operating activities, investing activities and financing activities
- Prepare the statement of cash flows using direct method
- Prepare the cash flow statement using indirect method
Financial Statement of companies are prepared following the accounting standards prescribed in the companies Act, 2013. Accounting Standards are notified under section 133 of the Companies Act, 2013 vide Accounting Standards Rules, 2006 and are mandatory in nature. Companies Act, 2013 also specifies that if the accounting standards are not followed, financial statements will not be true and fair, which is a quality of financial statement.
A cash flow statement provides information about the historical changes in cash and cash equivalents of an enterprise by classifying cash flows into operating, investing and financing activities. It requires that an enterprise should prepare a cash flow statement and should present it for each accounting period for which financial statements are presented. This chapter discusses this technique and explains the method of preparing a cash flow statement for an accounting period
A Cash flow statement shows inflow and outflow of cash and cash equivalents from various activities of a company during a specific period.
The primary objective of cash flow statement is to provide useful information about cash flows (inflows and outflows) of an enterprise during a particular period under various heads, i.e., operating activities, investing activities and financing activities.
6.1 Objectives of Cash Flow Statement
This information is useful in providing users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilise those cash flows. The economic decisions that are taken by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents and the timing and certainty of their generation.
Cash flow statement provides the following benefits -
6.2 Benefits of Cash Flow Statement
- A cash flow statement when used along with other financial statements provides information that enables users to evaluate changes in net assets of an enterprise, its financial structure (including its liquidity and solvency) and its ability to affect the amounts and timings of cash flows in order to adapt to changing circumstances and opportunities.
- Cash flow information is useful in assessing the ability of the enterprise to generate cash and cash equivalents and enables users to develop models to assess and compare the present value of the future cash flows of different enterprises.
- It also enhances the comparability of the reporting of operating performance by different enterprises because it eliminates the effects of using different accounting treatments for the same transactions and events.
- It also helps in balancing its cash inflow and cash outflow, keeping in response to changing condition. It is also helpful in checking the accuracy of past assessments of future cash flows and in examining the relationship between profitability and net cash flow and impact of changing prices..
NCERT Class 12 Books Accountancy Part 2 Chapter 6- Cash Flow Statement- PDF Download
Part 2 Chapter 6- Cash Flow Statement-
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Part 2 Chapter 6- Cash Flow Statement-
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