Cash flow statement is that statement in which, transaction related to cash are recorded. It is mandatory report and included in the financial statement of the company. It is divided into three parts operating activities, investing activity, and financial activity
Operating Activity:
Operating activity is the first part of the cash flow statement. The main focuses of the operating activity on the
Financing Activity:
Financing activity is the part of the cash flow statement. Financing activity involves the long term liability, borrowing and
Investing Activity:
Investing activity is the third part of the cash flow statement which gives the information related to the acquisition and disposal of the long term assets of the company such as land and building, investment and plant.
To prepare: Cash flow statement by direct method.
Explanation of Solution
Statement of cash flow
|
Particulars |
Amount ($) |
|
Cash flow from operating activities: |
|
|
Receipts from customers |
5,000,000 |
|
Payment for inventory |
(2,590,000) |
|
Payment for wages |
(550,000) |
|
Payment for rent |
(320,000) |
|
Payment for tax |
(450,000) |
|
Net cash flow from operating activities:(A) |
1,090,000 |
|
Cash flow from investing activities : |
|
|
Receipts from land sale |
220,000 |
|
Receipts from machinery sale |
710,000 |
|
Payment for machinery |
(2,236,000) |
|
Payments for long term investments |
(1,260,000) |
|
Net cash from investing activities:(B) |
(2,566,000) |
|
Cash flow from financing activities: |
|
|
Receipts from dividends |
208,400 |
|
Receipts from issuing stock |
1,540,000 |
|
Receipts from borrowing |
3,600,000 |
|
Payment for interest |
(218,000) |
|
Payment for notes payable |
(386,000) |
|
Payment for dividends |
(500,000) |
|
Payment for |
(218,000) |
|
Net cash flow from financing activities:(C) |
4,026,400 |
|
Net decrease in cash
|
2,550,400 |
|
Add: Cash opening balance |
333,000 |
|
Cash ending balance |
2,883,400 |
Table (1)
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