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A statement that tells the company about the inflows and outflows of cash is known as cash flow statement. It contains all vital information regarding cash that are from three different activities- operating, financing and investing. One of its main objectives is to enable the management have an insight on long-term planning. Cash flow statements can be prepared by using two methods- direct method and indirect method. The most commonly method used for the preparation of cash flow statement is called the indirect method. And the format that is less used while preparing the cash flow statement is the direct method. Preparation of Cash Flow Statement Assignment Help tells us that cash flow statement is not a substitute of income statement rather it provides additional information regarding the reasons for change in cash or its equivalents. Preparation of Cash Flow Statement Assignment Help throws light on both the direct and indirect method used for the preparation of cash flow statement.
Preparation of Cash Flow Statement
Information is collected from three basic sources while preparing cash flow statement. Balance sheets, income statements and some additional data, as mentioned in the following steps of Preparation of Cash Flow Statement Assignment Help, are required in the process. Steps involved in the preparation of cash flow statement are as follows
• Step 1- The first step is to refer the comparative balance sheets and then compute the net increase or decrease in cash. It is necessary to have brief understanding of balance sheet and income statement to comprehend the following steps mentioned in Preparation of Cash Flow Statement Assignment Help.
• Step 2- Now, refer the balance sheet, profit and loss account and additional data to calculate the net cash flow used in operating activities.
• Step 3- The third step is to calculate the net cash flow from the investing activities.
• Step 4- The fourth step is to calculate the net cash flow from the financing activities.
• Step 5- After calculating the net cash flow from all three activities, the fifth step is to prepare a formal cash flow statement containing the net cash flow from these activities i.e., from investing, operating and financing activities.
• Step 6-In this step, we have to refer the cash and cash equivalents calculated in Step 1. By using the three activities, we have to make an aggregate of net cash flows and ensure that it is equal to the net cash flows calculate din step 1. Students can learn all steps involved in this statement preparation process by referring Preparation of Cash Flow Statement Assignment Help.
• Step 7- In the last step, all non-cash transactions are reported in a separate schedule to the cash flow statement. Non-cash transactions such as purchase of machinery against issue of share capital, etc. For more information on cash flow statement, refer Preparation of Cash Flow Statement Assignment Help.
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