Cash Flow Notes3

Study Material & Notes for the Chapter 12

CASH FLOW STATEMENT

III.  TREATMENT OF CERTAIN SPECIFIC ITEMS

i. Dividend
Cash Flow 3.1
ii. Cash Flow from fixed Assets Movement
  • Increase in Fixed Assets vs previous year balance means more Fixed Assets have been acquired by the Organization leading to Cash Outflow
  • Decrease in Fixed Assets vs previous year balance means certain Fixed Assets have been disposed off by the Organization leading to Cash Inflow
  • Increase in Accumulated Depreciation/Provision for Deprecation means depreciation has been provided during the year
iii. Cash Flow from Income Tax Provision and Payment
  • AS-3 requires that cash flows arising from taxes on income should be separately disclosed and should be classified as Cash Flows from Operating Activities unless they can be specifically identified with financing and investing activities.
  • If there is no mention of Income tax paid in the Additional Information, it is assumed that opening balance of Provision for Taxation is paid during the year and closing balance of provision is created during the year
  • If Income tax paid during the year is provided in the Additional Information, Provision for Taxation General Ledger is prepared plotting Opening balance, Closing balance and Income Tax Paid. The balancing figure on the credit side is the Provision created during the year.

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