Cash Flows statement

Cash flow statement 

Today our topic is cash flows statement first we would know that what is cash flow statement. So we have three words one is cash 2nd is flow and 3rd is statement. For 1st word we can say  cash is money, 2nd flow means something which can comes in and go out in other word inflow and outflow , payment and receipt. 3rd word is statement "it means clearly expressing something in writing.

So with these definition it is clear what is cash flow statement " expressing and presenting inflow (Receipt) and outflow (payment) of cash in statement is called cash flow statement." 

Inflow and outflow of cash can written into statement in  three different  types of activities 

1. Cash flow from Operating activities, 2. Cash flows Investing activities and 3. Cash flows  Financing activities. After understanding these activities you will know that how you can prepare a statement of Cash flow. These entries are must for enabling yourself in preparing this statement.  So these three activities  can be explain as follows ;

1. Cash flows from operating activities;

During day to day operations of business various activities occur, these activities may be sale of goods and purchase of goods etc through these two activities 1st we make sale of  any goods or our product we receive cash and 2nd we may purchase goods for use in company we paid for the goods so cash payment. It is also referred to net income, why because in this two main type of activities revenue generation and expenses payment occur. Now  through these two item we get net income so that is why its referred to net income. Revenue is added or plus and expenses must be subtracted from revenue. This is about operating activities.

2.  Cash flows from investing activities;

By investing activities in cash flow statement we means " investment made by a company in long term or fixed assets (long term assets are those assets which can not be converted into cash in shortest period of time or it is a property of company e.g plant, machinery and equipment.) So in these type of assets we either pay amount for investment or receive the amount. E.g if we are going to  invest in building so we have to make payment first.

3. Cash flows from financing activities;

Financing activities is the last activity of statement of cash flow. Financing activities include owner equity and long term liabilities. It can be described as whenever a businessman  Receipts money for  business or whenever businessman payback amount or money. This is a simple concept its about payment and receipts of finance (funds require to operate business ). E.g bank loans receipts or payment, dividend paid to shareholders etc.
So that we conclude all about these three activities.

Before starting to prepare  cash flow statement  I will suggest you that you Also learn income statement and balance sheet because Cash flow statement is prepared with the help of income statement and balance sheet. Here is link below income statement and balance sheet . now I am uploading one example question on this topic and after that I will explain this example. Lets see the picture below;

Explanation;

 At first we  wrote the name of company and then we wrote the statement which is cash flow statement and last we wrote  in which month we prepared this statement which is January with this we wrote year as well . this is called header remember that this is very important some of the student ignore this part that is why they didn't got high marks. After the header we start our question we add  two column for amount while one is particular you can also prepare this statement without these column but if you add this column it will attract the reader in positive way.  In Cash flows from operating activities we found  cash receipts from revenue and some of the expenses we paid. So subtracted the amount of expenses from revenue and the remaining balance is our net cash provided by operating activities. In second of our cash flows activities which is cash flow from investing activities we found one activity under this head which is cash paid for equipment. 3rd activities of this cash flow statement is financing activities 1st we found that owner invested some amount in his business which is owner equity in definition parts I explain that financing activities include owner equity and long term liabilities. So if an owner of business invest amount in business it is included in financing activities. Because owner investment is capital and capital is owner equity. After that as you see that after financing amount was in positive figure so we wrote net cash increase. Last entry is easy just see the beginning balance from your transactions and add this here in Cash flow statement beginning balance must begins with 1st date of any month. After that we will got the ending balance on January 31. End