Ms. Jyo preparation of cash flow statement for the year 2015 : of Star Oils Limited has collected the following information for the ( $ in lakhs) 25,000 Interest Expenses 8,535 Interest paid during the year 5,000 Increase in Working Capital ( $ in lakhs) 10,000 Net Profit Dividend (including dividend tax) paid 10,520 Provision for Income-tax Income tax paid during the year 4,248 (excluding Cash & Bank balance) 56,075 Loss on Sale of Assets (net) 40 Purchase of Fixed Assets 14,560 Book Value of the Assets sold 185 Investment in Joint Venture 3,850 Depreciation charged to Profit & Loss Account Expenditure on Construction Work in Progress 20,000 34,740 Amortisation of Capital Grant Profit on Sale of Investments 6 Proceeds from Calls in Arrear 100 Receipt of Grant for Capital Projects 27,765 Proceeds from Long-term Borrowings Proceeds from Short-term Borrowings 12 Carrying amount of Investments sold Interest Income on Investments 25,980 20,575 5,003 6,988 received during the year 2,506 Opening Cash and Bank Balance Closing Cash and Bank Balance Required : Prepare Cash Flow Statement (by indirect method) for the year 2015 in accordance with AS-3.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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