Explain the techinques of preparing fund flow statement illustrated with imaginary figures?

Answer 1

(A) cash form operating activities

net profit before tax and extraordinary items:

add: tax made during the year

add: transfer to general reserve

add: dividend paid during the year

adjustments:

1. add: depreciation charged during the year
2. add: written off fictitious assets
3. add: loss on sale of fixed assets
4. add: goodwill written off
5. add: interest paid
6. add: provision (like provision for doubtful debts

1. less: gain on sale of fixed assets
2. less: interest received
3. less: dividend received

operating profit before changing working capital

add: increase in current liabilities

decrease in current assets

less: increase in current assets

decrease in current liabilities

less : tax paid during the year

(net cash from operating activities)

(B) cash from investing activities

add: sales of fixed assets

add: sales of any long term investment

less: purchase of any fixed assets

less: purchase of any long term investment

(net cash from investing activities)

(C) cash form financing activities)

add: issue of share capital

add: issue of debenture

less: payment of preference shares

less: payment of debentures

less: payment of dividend

less: payment of interest

(net cash from financing activities)

A+B+C

add opening balance of cash and cash equivalent

this is final which must match the closing balance of cash and cash equivalent

solution by:

SAM BIDHAN

KAITHAL (HARYANA)136027