Cash Flow Statements in Accountancy
Accountancy starts from basic of accountancy and ends with the preparation of Financial statements. . Cash Flow statement is a part of the Financial Statements. It is also known as funds flow statement.
In day to day life, many of you might have know about the cash flow statement however majority of us still not know exactly what it is ?
Cash Flow statement is one of the main financial statements along with the balance sheet, profit and loss accounts, directors reports etc.
As the name suggest Cash flow statement is nothing just a statement of cash received and cash spent during a particular time.
The cash flow statement prepared with an objective of getting insight information about cash generated and disbursed during the period
A. Operational Activitie
B. Capital Investment
Financial statements help management in proper decision making process relating to financial activities and Cash flow statements indicates cash profitability of an unit and generally all bank insist for a cash flow statement before granting any credit facility.
This statement is further used in the below way.
1. The cash from operating activities is compared to the company’s net profit. If the cash from operating activities is higher than the net profit, the company’s net income or earnings are said to be of a “highly solid If the cash from operating activities is less than net income, a red flag is raised as to why the reported net income is not turning into cash.
2. Further “cash is considered as king”. The cash flow statement identifies the cash that is flowing in and out of the company. If a company is consistently generating more cash than it is using, the company will be able to increase its dividend,
3. Some financial models and bank finance are based upon cash flow.
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