How to Prepare Cash Flow Statement?
1. Computation of Cash Flows from Operating activities:
Profit earned during the year …
Add The Proposed Dividend for the Previous year …
Add The Interim Dividend paid during the year …
Add Transfer to General Reserve …
Add The Provision for tax made during the year ...
Less Refund of Income Tax (…)
Less Extraordinary Income credited to Profit and Loss account (…)
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Net Profit before Tax and extraordinary Income ...
Adjustment for Non-cash/Non-operating items:
Add Depreciation …
Add Preliminary Expenses written off …
Add Discount on Issue of Shares/Debentures written off …
Add Goodwill/patents/trademarks amortized …
Add Loss on sale of fixed assets …
Add Interest on Loans borrowed and Debentures …
Less Interest/Dividend/Rental Income (…)
Less Profit on sale of fixed assets (…)
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Operating Profit before Working Capital Changes ...
Add Decrease in Current Assets (except cash and cash equivalents) ...
Add Increase in Current Liabilities (except Bank Overdraft) ...
Less Increase in Current Assets (except cash and cash equivalents) (...)
Less Decrease in Current Liabilities (except Bank Overdraft) (...)
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Cash generated from operations ...
Less Income Tax paid (Net of Tax refund received) ...
----------------------
Cash Flow before extraordinary items ...
Add/Less Extraordinary items ...
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Net Cash from (used in) Operating activities ...
2. Computation of Cash Flows from investing activities:
Proceeds from sale of fixed assets/Investments/intangible assets ...
Interest, Dividend (In case of Non-financing companies) ...
Rent received ...
Less Purchase of Fixed assets/Investments/intangible assets (...)
Add/Less Extraordinary items ...
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Net Cash from (used in) Investing activities ...
3. Computation of Cash Flows from Financing activities:
Cash receipts from issue of Equity Shares/ Preference Shares ...
Cash receipts from issue of Debentures/any other debt instrument ...
Proceeds from Bank Overdraft ....
Cash payments for Buy back of Equity shares (...)
Cash payments for Redemption of Preference shares (...)
Cash payments for Redemption of Debentures/loan (...)
Payment of Dividend on Equity/Preference shares (...)
Proposed Dividend of Previous Year (...)
Payment of Interest on Debentures and loans (...)
Payment of Bank Overdraft (....)
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Cash Flows from (used in) Financing activities ...
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Net Increase/Decrease in Cash and Cash Equivalents (1+2+3) ...
Add Cash and Cash Equivalents in the beginning of the year ...
(Cash in hand, bank balance, short term deposits and marketable securities) ----------------
Cash and Cash Equivalents at the end of the year ...
(Cash in hand, bank balance, short term deposits and marketable securities) ---------------
Note: 1.The amounts in brackets denote items to be subtracted (negative).
2. Bank Overdraft and Cash Credit are to be considered as Short Term Borrowings and dealt in Financing Activities.