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\u00a0<\/span><\/span><\/p>\n \u00a0<\/span><\/span><\/p>\n \u00a0<\/span><\/span><\/p>\n There are two methods to prepare cash flow statement; they are:<\/span><\/p>\n (1) Direct method<\/span><\/p>\n (2) Indirect method <\/span><\/p>\n \u00a0<\/span><\/p>\n Both methods have three activities; they are:<\/span><\/p>\n (a) Operating activities <\/span><\/p>\n (b) Investing activities<\/span><\/p>\n (c) Financing activities<\/span><\/p>\n \u00a0<\/span><\/p>\n Keep in Mind (KIM) <\/span><\/b><\/p>\n Only operating activities are difference between direct methods and indirect method.<\/span><\/p>\n<\/td>\n<\/tr>\n Investing activities and financing activities are same in both methods. <\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n \u00a0<\/span><\/b>\u00a0<\/span><\/span><\/p>\n \u00a0<\/span><\/span><\/p>\n It is based on non-current assets or fixed assets (assets side of balance sheet)<\/span><\/b><\/span><\/p>\n Purchase and sales of non-current assets (fixed assets and long-term assets) are calculated in investing activities. <\/span><\/p>\n Any increase in assets mean purchase of assets, it is outflow for the company. <\/span><\/p>\n Any decrease in assets mean sales or depreciation of assets. <\/span><\/p>\n It is inflow for the company. <\/span><\/p>\n If there is depreciation, loss, profit, purchase and sales fixed assets in income statement or profit and loss account, working notes should be prepared. <\/span><\/p>\n Plant and machinery <\/span><\/p>\n Land and building <\/span><\/p>\n Furniture and fitting<\/span><\/p>\n Equipment <\/span>\u00a0<\/span><\/p>\n Investment<\/span><\/p>\n Cash flow Statement<\/span><\/b><\/p>\n Direct Method<\/span><\/i><\/p>\n Particulars <\/span><\/p>\n<\/td>\n Amount<\/span><\/p>\n<\/td>\n Amount<\/span><\/p>\n<\/td>\n<\/tr>\n CASH FROM INVESTING ACTIVITIES<\/span><\/b><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Cash inflow:<\/span><\/b><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n xxxx<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Sales of plant and machinery <\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n xxxx<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Sales of land and building <\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n xxxx<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Sales of equipment <\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n xxxx<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Sales of investment<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n xxxx<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Loan from subsidiary company<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n xxxx<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Cash outflow:<\/span><\/b><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Purchase of plant and machinery <\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n (xxx)<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Purchase of land and building<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n (xxx)<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Purchase of equipment\u00a0 <\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n (xxx)<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Purchase of investment<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n (xxx)<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/b><\/p>\n<\/td>\n Drawings<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n (xxx)<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/p>\n<\/td>\n Net cash from investing activities (B)<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n \u00b1 xxxx<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n \u00a0<\/span><\/p>\n \u00a0<\/span><\/b><\/p>\n Keep in Mind (KIM) <\/span><\/b><\/p>\n Sales of plant and machinery mean cash inflow.<\/span><\/p>\n<\/td>\n Purchase of plant and machinery mean cash outflow.<\/span><\/p>\n<\/td>\n<\/tr>\n Sales of land and building mean cash inflow.<\/span><\/p>\n<\/td>\n Purchase of land and building mean cash outflow.<\/span><\/p>\n<\/td>\n<\/tr>\n Sales of furniture mean cash inflow.<\/span><\/p>\n<\/td>\n Purchase of furniture mean cash outflow.<\/span><\/p>\n<\/td>\n<\/tr>\n Sales of investment mean cash inflow.<\/span><\/p>\n<\/td>\n Purchase of investment means cash outflow.<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/p>\n Never charge depreciation on investment.<\/b><\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n Under direct method, no entry for profit or loss of assets.<\/span><\/p>\n<\/td>\n<\/tr>\n Under direct method, no entry for depreciation of assets.<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n Drawings \u00a0\u00a0 = beginning capital + net income \u2013 ending capital <\/span><\/p>\n<\/td>\n<\/tr>\n Dividends<\/sup> and interest received may be inflow of operative activity<\/span><\/p>\n<\/td>\n<\/tr>\n \u00a0<\/span><\/p>\n If purchase and sales of particular fixed asset is given, no need to prepare ledger of working note.<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n \u00a0<\/span><\/p>\n <\/p>\n <\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/span>\u00a0<\/span><\/p>\n Here, Amount = Rs = $ = \u00a3 = \u20ac = <\/span>\u20b9<\/span> = Af = <\/span>\u09f3 <\/span>= Nu = Rf = <\/span>\u0dbb\u0dd4<\/span> = Br = P = Birr = Currency of your country<\/span>\u00a0 <\/span><\/p>\n PROBLEM: 2A<\/span><\/b><\/p>\n The following extracted balances are taken from ABC Company Ltd:<\/span><\/p>\n Particulars <\/span><\/p>\n<\/td>\n 1 January<\/span><\/p>\n<\/td>\n 31 December<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n Plant and machinery <\/span><\/p>\n<\/td>\n 7,50,000<\/span><\/p>\n<\/td>\n 10,50,000<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n Investment <\/span><\/p>\n<\/td>\n 1,56,000<\/span><\/p>\n<\/td>\n 56,000<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n Land <\/span><\/p>\n<\/td>\n 10,00,000<\/span><\/p>\n<\/td>\n 8,00,000<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n Equipment <\/span><\/p>\n<\/td>\n 1,50,000<\/span><\/p>\n<\/td>\n 1,50,000<\/span><\/p>\n<\/td>\n \u00a0<\/span><\/p>\n<\/td>\n<\/tr>\nPreparation of Cash Flow Statement <\/span><\/b><\/h3>\n
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