1. ACCOUNTING STANDARD-3 CASH FLOW STATAEMENTS

2. POINTS NEED TO BE REMEMBER This standard is mandatory in nature in respect of accounting periods on or after 1-4-2004 for the enterprises which fall in the category of level-I, at any time during the accounting period. For all other enterprises it is not mandatory. Where an enterprises was not covered by this statement during the previous year but qualifies in the current accounting year – no need of disclose the figures for the corresponding previous year. Whereas, if an enterprises qualifies in previous year and now disqualified – will continue to prepare cash flow statements for another two consecutive years.

3. OBJECTIVE OBJECTIVE Cash flow statement (CFS) – additional information- provided to the users – in form of the statement, which reflects the various sources from where cash was generated (Inflow of Cash) by an enterprise during the relevant accounting year and how these inflows were utilized (Outflow of cash) by the enterprise.

4. PRESENTATION OF A CASH FLOW STATEMENT Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash. Cash flows are inflows and outflows of cash and cash equivalents.

5. PARA -6 of Accounting Standard-3 Cash Equivalents are held for the purpose of meeting short-term cash commitments (Maximum three months of maturity from the date acquisition) rather than for investment or other purposes. Highly Liquid Investments. Readily Convertible. Convertible amount of cash is known. Subject to an insignificant risk of changes in value.

6. For Example:- Share capital is not considered as cash equivalent even though they are readily convertible into cash, because the amount that will be realized on sale of investment is not determinable unless investment is actually sold. Fixed deposit for one year is also not considered as cash equivalent because they are not readily convertible into cash, even though the amount is determinable. “Always Remember the concept of three months or less”

7. RELEVANT DEFINITIONS RELEVANT DEFINITIONS Operating activities are the principal revenue-producing activities of the enterprise. Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities are activities that result in changes in the size and composition of the owner’s capital (including preference share capital in the case of a company) and borrowings of the enterprise.

8. PRESENTATION OF THE CASH FLOW STATEMENT The cash flow statement should report cash flows during the period. The cash flows have to be classified activity- wise into operating, investing and financing activities.

9. Net cash Flow From Operating Activities Investing Activities Financing Activities Direct Method In-Direct Method Direct Method

10. Format of Cash Flow Statement for the year ended 20xx( Direct Method) ParticularsRs. Cash received from sale of goodsxxx Cash received from Debtorsxxx Cash Received from sale of servicesxxx Less: Payment for Cash Purchasesxxx Payment to creditorsxxx Payment for operating expensesxxx e.g. Power, Rent, Electricity. Payment for wages & Salariesxxx Payment for Income Taxxxx Adjustment for Extraordinary Items xxx Net Cash Flow from Operating Activities xxx

11. Format of Cash Flow Statement for the year ended 20xx( In-Direct Method) ParticularsRs. Operating activities:xxx Closing balance of profit and Loss Accountxxx Less: Opening balance of profit and Loss accountxxx Reversal the effects of profit & Loss Appropriation A/c.xxx Add: Provision for Income Tax.xxx Effects of Extraordinary itemsxxx Net Profit Before Tax and extraordinary itemsxxx Reversal the effects of non-cash & Non-operating itemsxxx Effects for changes in working capital except cash & Cash equivalentxxx Less: Payment of income Taxxxx Adjustment for extraordinary Items xxx Net cash flow from operating activities xxx