It is prepared by the companies to show that how cash inflows and outflows are arrived from different business activities.
Cash flow statement shows the cash flows from different activities and it is prepared to show how much cash inflow and outflow from operating, investing and financing activities.
Yes in indirect method of cash flow statement , cash flow from operating activities is prepared by taking the current year income as starting point
International accounting standard number 7 is about cash flow statements and how it should be prepared.
A funds flow statement compares a company's actual cash flow with its predicted cash flow. This allows a company to examine the factors that may have caused a failure to meet goals.
Direct and indirect method of preparing cash flow statement is same with only one difference which is under indirect method 'Cash flow from operating activities' is prepared by adjusting the net profit amount for non cash items while 'Cash flow from financing activities' and 'Cash flow from investing activities' is prepared in same manner in both methods.
The Income Statement must be prepared first because the Current Profit or Loss (from the Income Statement) is needed in the Equity section of the Balance Sheet to make it balance. Also, the current profit or loss is the starting point to calculate Cash from Operations needed for the Cash Flow Statement.
Cash balance from cash flow statement should always tally with balance sheet cash balance otherwise it means that cash flow statement is not prepared accurately and proper investigation should be launched to check the discrepancies .
Cash Flow Statement's ending balance should match with the ending balance of cash in the balance sheet that is why cash flow statement is prepared to see the complete information about cash flow during the period if it doesn't match it means something wrong.
The cash flow statement looks at the past while the cash budget is for planning for the future. Cash Flow:1)Cash flow statements shows the cash inflow2)Preparation done of the past events3)Use as tool of analysis & determine likely flow of cash4)It starts with cash & cash equivalents & end with cash & cash equivalents.5)Basically, it prepared for financial accounting period6)The cash flow statement prepared as per IAS 077)It prepared for utility of external agenciesCash Budget:1)All expected cash receipts & estimates2)Preparation done on forthcoming events3)Surplus cash receipts planned for profitable investments4)It starts with cash on hand & bank & close with cash on hand & bank5)It may prepared for a month, quarter, half year or annual6)There is no specific format prescribed for preparation7)It is prepared as part of planning for the utility of internal management
in cash flow statement using indirect method actual net profit from income statement is adjusted for non cash items to arrive at actual cash from operating activities.
Another name of cash flow statement is fund flow statement.
Prime purpose of preparing cash flow statement is to tally the closing bank balance with opening bank balance so if there is a bank overdraft or negative bank balance it will automatically adjusted when complete cash flow statement is prepared. If after the preparation of cash flow, cash flow balance and bank balance don't tally it means there is some mistake in cash flow statment and it should be reviewed for any correcions.