Cash flow statement is concerned with..............in cash position
AIncrease
BDecrease
CChange
DDemand
Answer:
C. Change
Read Explanation:
Overview of Cash Flow Statement
- A Cash Flow Statement (Statement of Cash Flows) is a financial statement that provides aggregate data regarding all cash inflows and outflows a company receives from its ongoing operations and external investment sources.
- It specifically tracks the change in cash and cash equivalents during a specific accounting period, bridging the gap between the Income Statement and the Balance Sheet.
Key Components
- Operating Activities: Cash flows generated from the core business activities (e.g., receipts from sales, payments to suppliers).
- Investing Activities: Cash flows related to the purchase or sale of long-term assets, such as Property, Plant, and Equipment (PPE), and other investments.
- Financing Activities: Cash flows resulting from transactions with owners or creditors, including issuing stock, paying dividends, or repaying loans.
Essential Accounting Standards
- In India, the preparation of the Cash Flow Statement is governed by Accounting Standard 3 (AS-3) for non-converged entities and Ind AS 7 for entities complying with International Financial Reporting Standards.
- It is mandatory for companies, except for One Person Companies, Small Companies, and Dormant Companies, to include a Cash Flow Statement as part of their financial statements under Section 129 of the Companies Act, 2013.
Analytical Importance
- It helps stakeholders assess a company's liquidity and solvency by revealing how effectively it generates cash to meet its obligations.
- Unlike the accrual basis of accounting used in Profit and Loss accounts, the Cash Flow Statement focuses strictly on actual cash movements, making it a reliable tool for measuring short-term financial health.