General Studies and Accounting

CIMA defines Budget as “A plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure, and the capital to be employed. May be drawn up showing incremental effects on former budgeted or actual figures, or be compiled by zero-based budgeting”.

It helps the management about its objectives to achieve, how the plans to be adopted, whether individual plans fit in the overall organizational objective.

In CIMA (London) terminology –

“Budgetary control is the establishment of budgets relating to responsibilities of executives to the requirement of a policy, and the continuous comparison of actual with budgeted results either to secure by individual action the objective of that policy or to provide a basis for revision.”

Budgets and Forecasts.

A forecast is a prediction of what is going to happen as a result of a given set of circumstances. A budget is an approved plan of action expressed in figures relating to a specified period of time.

Advantages:

1) It helps the management to plan the functions before the action occurs.

2) There will be good co-ordination and participation between the management.

3) All functional heads are get into responsible to make plans with the plans of other departments.

4) It demands the most economical use of labour, materials, facilities and capital.

5) It helps the management to face the changes in business conditions.

6) It helps to understand the problems of co-workers.

Material Cost Variance Problems - Standard costing

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The standard cost of a compound mixture is as under:

30% of material A at Rs.25 per ton. 70% of material B at Rs.35 per ton.

A standard loss of 10% is expected in production. The following actual cost data is given for the period.

290 tons material A at a cost of Rs.20 per ton.

210 tons material B at a cost of Rs.25 per ton.

The weight produced is 400 ton.

Find Material variances

Actual cost of material used		Stanadard cost material used		Standard cost of material, if it had been used in standard proportions.
290*20 =	5800	290*25 =	7250	30% of 500 * 25 =	3750
210*25 =	5250	210*35 =	7350	70% of 500 * 35 =	12250
	11050		14600		16000

Standard cost of output.


3200/90*400=	14222

Standard cost of output
Standard Mix	Standard rate	Standard cost
30	25	750
70	35	2450
-10	LOSS
90		3200

Material price variance	14600-11050=	3550
Material mix variance	16000-14600=	1400
Material yield variance	14222-16000=	-1778
Material cost variance	14222-11050=	3172

Total Quality Management:

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Total Quality Management:

CIMA has defined TQM as “Continuous improvement in quality, productivity and effectiveness obtained by establishing management responsibility for process as well as output. In TQM, every process has an identified process owner and every person in an entity operates within a process and contributes to its improvement”.

TQM initiates total quality cost programme., they are as follows:

(a) Prevention cost which is incurred in preventing of producing the product that do not conform to specification.

(b) Appraisal cost is incurred for detecting the individual product which do not conform to specification.

(d) External failure cost which is incurred in detecting the non-conforming products after passing to customers.

Backflush Accounting (Backflush costing).

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Backflush Accounting (Backflush costing).

Definition:

CIMA defines it as “cost accounting system, which focuses on the output of an organization and then works back to attribute costs to stock and cost of sales”.

Traditional costing systems use sequential tracking, i.e., costing methods are synchronized with physical sequences of purchases and production.

Backflush costing is the reversal of traditional costing, where traditional costing flow from accounting of inputs to outputs but backflush starts accounting only from outputs and then works back to apply manufacturing costs to units sold and to inventories. In this, cost of inventories are at the time of sale only. Costs are then flushed back through the accounting system. It is attractive for low inventory companies which results from JIT.

It eliminates WIP account. There are reason for justification, they are as follows.

i) To remove incentive for managers to produce for inventory.

ii) To increase the focus of the managers on plant-wide goal rather than on individual sub-unit goals.

Difficulties of Backflush costing:

i) It does not strictly adhere to generally accepted accounting principles of external reporting.

ii) Absence of audit trails leads to critics.

iii) It does not pinpoint the use of resources at each step of the production process.

iv) It is suitable only for JIT production system with virtually no direct material inventory and minimum WIP inventories. It is less feasible otherwise.

Average collection period:

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Average collection period:

It is the average amount of time needed to collect accounts receivable.

Debtors receivables turnover:

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Debtors receivables turnover:

It shows the relationship between credit sales and debtors of a firm.

It is sometimes difficult for the analyst to identify credit sales, average debtors and average bills receivable. Mainly to ascertain opening and closing details to identify average of it feels difficult in certain cases. To avoid difficulty of above cases, the alternative method is to calculate the debtors turnover in terms of the relationship between total sales and closing balance of debtors.

Receivables Turnover Ratio:

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Receivables Turnover Ratio:

It helps to identify how quick the receivables or debtors are converted into cash. It helps to test the liquidity of the debtors of a firm. It is closely related to average collection period.

The liquidity of a firm’s receivables can be examined in two ways:

(1) Debtors receivables turnover;

(2) Average collection period.

Inventory( or Stock) Turnover Ratio:

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Inventory( or Stock) Turnover Ratio:

It is to identify how fast the inventory moves out or sold. It measures the activity/ liquidity of inventory of a firm. It indicates the number of times inventory is replaced during the year. We can compute in two ways. One is the way to calculate dividing the cost of goods sold by the average inventory and the other is replaced by sales instead of cost of goods sold and instead of average inventory take the closing inventory. Average inventory is calculated on the basis are as follows.

Taking from January to January of opening inventory add them and divided by thirteen will be resulted to industry average.

Activity Ratios:

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Activity Ratios:

Activity ratios measure the speed with which various accounts/ assets are converted into sales or cash. They are concerned with measuring the efficiency in asset management.

The efficiency with which assets are used would be reflected in the speed and rapidity with which assets are converted into sales. The greater is the rate of turnover or conversion, the more efficient is the utilization of assets, other things being equal. Turnover is the primary mode for measuring the extent of efficient employment of assets by relating the assets to sales. According to assets, the activity ratio changes. The various types of ratios are as follows.

(1) Inventory Turnover Ratio.

(2) Receivables Turnover Ratio.

(3) Asset Turnover Ratio.

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Price Earnings Ratio:

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Price Earnings Ratio:

It is closely related to earnings yield/earnings price ratio.

It is the ratio computed by dividing the market price of shares by EPS.

It measures the amount investors are willing to pay for each rupee of earnings; the higher the ratios, the larger the investors confidence in the firm’s future.

Earnings and Dividend Yield:

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Earnings and Dividend Yield:

It is closely related to EPS and DPS. While the EPS and DPS is based on the book value per share, the yield is expressed to terms of the market value per share.

Earnings yield may be defined as the ratio of earnings per share to the market value per ordinary share. Similarly, Dividend yield may be defined by dividing the cash dividends per share by the market value per share.

Dividend Pay-out Ratio:

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Dividend Pay-out Ratio:

It measures the proportion of dividends paid to earnings available to shareholders.

It measures the relationship between the earnings belonging to the ordinary shareholders and the dividend paid to them.

It shows what percentage of net profits after taxes and preference dividend is paid out as dividend to the equity-holders.

Dividend Per Share:

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Dividend Per Share:

It is the dividends paid to equity shareholders on a per share basis.

DPS is the net distributed profit belonging to the ordinary shareholders divided by the number of ordinary shares outstanding.

Price-to-Book Value Ratio:

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Price-to-Book Value Ratio:

It measures the relationship between market price of equity share with book value per share.

Book Value Per Share:

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Book Value Per Share:

It represents the equity/claim of the equity shareholder on a per share basis.

It is computed by dividing networth by the number of equity shares outstanding.

Cash Earnings Per Share:

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Cash Earnings Per Share:

It is determined that the cash flow from business operations is divided by the number of equity shares outstanding.

Cash flow from operations added by non cash expenses, such as depreciation, amortization to net profits available to equity owners.

Earnings Per Share:

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Earnings Per Share:

It is the amount that a shareholder get for every shares on the profit available to the equity shareholders on a per share basis.

It is calculated by dividing the profits available to the equity shareholders by the number of outstanding shares.

EPS is most widely used in estimation of firm’s value and performance.

EPS is a measure of profitability of a firm.

It helps to compare with past performance, comparison with other firms and comparing with the industry average.

Return on Ordinary Shareholders’ Equity (Net worth):

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Return on Ordinary Shareholders’ Equity (Net worth):

It measures the return on the total equity funds of ordinary shareholders.

Preference shareholders are also the owners of firm, but equity shareholders are real owners who bears all risk, participate in management and are entitled to all the profits remaining after all outside claims including preference dividends are met in full.

It is calculated by dividing the profits after taxes and preference dividend by the average equity of the ordinary shareholders.

It helps to judge the firm has earned

a satisfactory return for its equity-holders or not.

It helps to compare with past results, inter-firm comparison, comparison with the overall industry average.

Return on Total Shareholders’ Equity:

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Return on Total Shareholders’ Equity:

It is measured by dividing the net profits after taxes(but before preference dividend) by the average total shareholders’ equity.

Shareholders’ equity includes here as follows:

(i) Preference share capital,

(ii) Ordinary shareholders equity consisting of

(a) Equity share capital,

(b) Share premium, and

It helps to compare the relative performance and strength of the firm to other firms.

Return on Shareholders’ Equity:

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Return on Shareholders’ Equity:

The relationship between return and the shareholders’ equity or owners’ funds.

It measures the return on the owners investment in the firm.

The shareholders of a firm fall into 2 categories:

Preference Shareholders,

Equity shareholders.

Preference shareholders will give preference right over dividends first than to the equity shareholders.

Return on shareholders’ equity classified into:

(1) Rate of return on

(i) Total shareholders’ equity,

(ii) Equity of ordinary shareholders.

(2) Earnings per share,

(3) Dividends per share,

(4) Dividend-pay-out ratio,

(5) Dividends and Earnings yield,

(6) Price-earnings ratio,

(7) Cash earnings per share,

(8) Book value per share,

(9) Price-to-book value per share.

Return on capital employed:

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Return on capital employed:

ROCE is the second type of ROI. It is the relationship between the profits and capital employed.

The term capital employed refers to long-term funds supplied by the lenders and owners of the firm.

There are 2 ways. First, non-current liabilities(long-term liabilities) plus owners’ equity.

Alternatively, its equivalent to net working capital plus fixed assets.

Second, it is equal to long-term funds minus investments made outside firm.

It is to estimate how efficient the long-term funds have been used?

If the ratio is higher, the more efficient is the use of capital employed.

Return on assets:

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Return on assets:

Profitability ratio is measured in terms of the relationship between n

et profits and assets.

ROA can be called as profit-to-asset ratio.

Profit and assets defined in different approaches on the bas

is of purpose and intent of the calculation of ratio.

Net profit may be defined as,

(i) Net profit after taxes,

(ii) Net profit after taxes plus interest,

(iii) Net profit after taxes plus interest minus tax savi

ngs.

Assets may be defined as,

(i) Total assets,

(ii) Fixed assets,

(iii) Tangible assets.

Profitability Ratios Related to Investments:

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Profitability Ratios Related to Investments:

Return on Investments(ROI):

It is computed by relating the profits of a firm to its investments. Such ratios are popularly termed as ROI. There are three different concepts of investments for computation:

Assets,

Capital employed,

Shareholders’ equity,

They are

(1) Return on assets,

(2) Return on capital employed,

(3) Return on shareholders’ equity.

Material cost variance

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Material Cost Variance.

It represents the difference between actual cost of material used and standard cost of material specified for output achieved. Material cost variance arises due to variation in prices and usage of materials. Difference b

etween (actual quantity of materials used x actual rate) and (standard quantity of material required for the specified output x standard rate) will be material cost variance.

Material Price Variance.

It is the difference occurred between actual price paid and standard price specified for the material which leads to material cost variance. It is not controllable but it gives information for the purpose of planning and decision-making. It helps in making decision to increase the price of product, use of substitute materials.

Material Usage or Volume variance.

It is also called quantity variance. It is part of cost variance occurred due to difference between actual quantity used and standard quantity specified for output.

It helps to identify whether the materials are used in proper manner. A debit balance of material usage variance indicates that material used was in excess of standard requirements. Credit balance shows will show savings in the use of material.

Material usage variance consists of (a) Material mix variance, (b) Material yield variance.

Material Mix Variance.

The variance is that part of material usage variance which is due to difference between actual composition of mix and standard composition of mixing the different types of materials. Short supply is the most common reason for this variance.

Material Yield Variance.

In certain cases, output depends on input of material. In this circumstances, if 10% of input material in course of normal loss of production. Then, 90% of total input of material will be expected output. If actual yield obtained happens to be different from the standard yield specified, there will be a yield variance. Thus material yield variance is that portion of material usage variance, which due to difference between actual yield obtained and standard yield specified.

Problems and Solutions

Expenses Ratio

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Expenses ratio:

It is calculated by dividing expenses by sales.

“Expenses” includes:

(1) Cost of goods sold,

(2) Administrative expenses,

(3) Selling and distribution expenses,

(4) Financial expenses but doesn’t include taxes, dividends and extra-ordinary losses due to theft of goods, goods destroyed by fire etc.,

Profit margin ratio

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Profit margin:

It measures the relationship between profit and sales. As the profits may be gross or net, there are two types of profit margins:

Gross profit margin:

It is also known as gross margin. It is calculated by dividing gross profit by sales.

Net profit margin:

It is also known as net margin. This measures the relationship between net profits and sales of a firm.

Depending on the concept of net profit employed, this ratio can be computed in 3 ways:

Classification and computation of variances.

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Classification and computation of variances.

Variances can be classified under the following headings :

(i) Cost variance,

(ii) Sales margin variance,

(iii) Sales value variance,

Cost variance

It represents the difference between the costs actually incurred for production and the costs specified for the same. It is the sum total of following variances:

(a) Direct material cost variance.

(b) Direct wage variance.

(d) Fixed overhead variance.

Limitations of standard costing.

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Limitations:

Standard costing is a very good system, but it should be used giving regard to following limitations:

Identifying of standards requires lot of skill, imagination and experience. If these are not in harmony, desired results will not be identified.
Analysis of variance is useful, but its difficult to link the deviations with responsibility. Because the result happens to be the outcome of a number of contributory factors.

Standards should be determined on the basis of current conditions for best results, as it changes rapidly. Revision of standards is a costly exercise and leads to a lot of associated problems. Due to this, standards may get ignored.

It is difficult to use standard costing, when working conditions do not permit standardization of material contents, labour contents or the use of indirect services relating to different jobs, process and services.

Inefficient management leads to ineffective standard costing.

Isolating the controllable and uncontrollable elements of variances is a very difficult exercise and this difficulty restricts the application of standard costing.

Due to setting of standards at high level, it created adverse psychological effects.

Standard costing -USES

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Uses:

- Establishing budgets.

- Controlling costs and motivating and measuring efficiencies.

- Promoting possible cost reduction.

- Simplifying cost procedures and expediting cost reports.

- Assigning cost to materials, WIP and finished goods inventories.

- Forms basis for establishing bids and contracts and for setting selling prices.

Favorable and unfavorable variances

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Favorable and unfavorable variances(Standard costing):

Variances may be favorable [ Positive or Credit ] or unfavorable [ Negative or Adverse or Debit ] depending upon whether the actual resulting cost is less or more than the standard cost.

Favorable variance:

When the actual cost incurred is less than the standard cost, the deviation is known as favorable variance. The effect of the favorable variance increase the profit.

Unfavorable variance:

When the actual cost is incurred is more than the standard cost, there is variance is known unfavorable or adverse variance. Unfavorable variance refers to deviation to the loss of business.

Definition of standard costing

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Definition of standard costing:

(1) CIMA (London) defines, “standard costing is a control technique which compares standard costs and revenues with actual results to obtain variances which are used to stimulate improved performance”.

(2) According to Prof. Eric L. Kohler, “Standard is a desires attainable objective, a performance, a goal, a model”. Standard may be used to a pre-determined rate or a pre-determined cost or a pre-determined amount.

(3) According to ICMA technology defines “standard costing is the preparation and use of standard costs, their comparison with actual costs and analysis of variances to their causes and points of incidence”.

Standard costing

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Introduction:

Standard Costing:

One of the most important functions of management accounting is to facilitate managerial control.

The major aspects of managerial control is cost control. The efficiency of management among other things depends upon the effective control of costs. For controlling costs, management should not only know actual cost.

The actual cost actually incurred but also pre-determined costs, the cost which should have been incurred. Standard costs are the widely used form of pre-determined costs.

The system of standard costing is the most efficient way of controlling costs.

It is a managerial device to determine efficiency and effectiveness of cost performance.

STANDARD: It is pre-determined measurable quantity set in defined conditions.

It seeks to establish the cost of a product, operations or process under standard operating conditions. The aim of standard cost is to eliminate the influence of abnormal changes in prices. It is used as a guide for future decision and action over a period of time.

Standard costing is effective tool for planning, decision making, co-ordination and control of business. The object of determination of price policy. It is a technique of cost control.

It is a scientifically pre-determined cost, which is arrived at assuming a particular level of efficiency in utilization of material, labour and indirect services.

CIMA defines standard cost as “a standard expressed in money. It is built up from an assessment of the value of cost elements. Its main uses are providing bases for performance measurement, control by exception reporting, stock valuation and establishing selling prices”.

Definition

Favorable and unfavorable variance

Uses

Limitations

Classification and computation of variances

Profitability ratio

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Profitability ratio:

Owners invest funds in order to expect reasonable returns. The operating efficiency depends upon the profits earned out of investment made by shareholders/owners.

It helps to identify the requirements of management:

1) Is the profits earned are adequate?

2) What rate of return does it represent?

3) What is the rate of profit for different divisions and segments of the firm?

4) What are the earnings per share?

5) What was the amount paid in dividends?

6) What is the rate of return to equity-holders?

Profitability ratios can be determined on the basis of either sales or investments.

The profitability ratios in relation to sales are

(a) Profit margin(gross and net),

(b) Expenses ratio.

The profitability ratios in relation to investment are

(a) Return of assets,

(b) Return on capital employed,

Cash flow from operations ratio

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Cash flow from operations ratio:

It is the comparison of actual cash flows from operations with current liability.

Defensive-interval ratios

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Defensive-interval ratios:

It is the firm’s ability to meet current liabilities and projected daily expenditure from operations. It is a measure of liquidity.

Calculation:

Debt services coverage ratio

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o Debt services coverage ratio.

Ability of firm to make contractual payments required on a scheduled basis over the life of debt.

Cash flow coverage ratio

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o Cash flow coverage ratio.

Firms ability to meet its various financial obligations to its earnings.

These payments are met out of cash available with the firm.

So its appropriate to relate cash with various financial obligations of firm.

Total fixed charges coverage ratio

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o Total fixed charges coverage ratio.

While the interest coverage and preference dividend coverage ratios consider the Fixed obligations of a firm to the respective suppliers of funds, that is, creditors and preference shareholders, the total coverage ratio has a wider scope and takes into account all the committed fixed obligations of a firm, that is, (i) interest on loan; (ii) preference dividend, (iii) lease payments; (iv) repayment of principal.

Dividend coverage ratio

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o Dividend coverage ratio.

Measures about the ability of the firm to pay dividend on preference shares which carry a stated rate of return. Ratio is based on earnings after taxes and the amount of preference dividend.

Interest coverage ratio

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o Interest coverage ratio.

Ratio measures the debt servicing capacity of a firm insofar as fixed interest on long-term loan is concerned. It can be calculated on the basis of the dividing the operating profits or earnings before interest and taxes(EBIT) by the fixed interest charges on loans.

Proprietary ratio

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Proprietary ratio.

Relationship between owners funds with total assets.

Debt-Assets ratio

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Debt-Assets ratio.

Relationship between borrowed funds and assets of the firm.

Turnover ratio

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Turnover ratios:

It is the ratio of getting cash out of converting current assets quickly.

Classified into different types.

They are as follows:

§ Inventory turnover ratio

Calculation:

§ Debtors turnover rati0

Calculation:

§ Creditors turnover ratio

Calculation:

Test/Quick ratio

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Ø Test/Quick ratios:

It is the ratio between quick current assets and current liabilities

Calculation:

Quick Assets are current assets which can be converted into cash or at short notice without decrease in value. Quick Assets which excludes prepaid expenses and inventory from current assets.

Current ratio

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Ø Current ratios:

It is the ratio of current assets to current liabilities.

Calculation:

Net working capital

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Ø Net working capital:
It represents the excess of net current assets over current liabilities.

Calculation:

Debt-Equity ratio

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o Debt-Equity ratio.

Relationship between borrowed funds and owner’s capital is measure of the long-term financial solvency of a firm

This is the ratio of the total outside liabilities to owners’ total funds

In other words, it is the ratio of the amount invested by the outsiders to the amount invested by the owners of the business

Leverage ratio

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Leverage/Capital Structure Ratios:

v Long term creditors/lenders to verify the ability of the firm to pay interest and instalment of the principal on due dates and lump sum at the time of maturity.

v Long-term solvency of a firm can be measured by using leverage or capital structure ratios.

v Types of Leverage Ratios are as follows:

ü The First type of capital Structure rat

is as follows:

Debt-Equity Ratio,

Debt-Assets ratio.

Proprietary ratio.

ü The Second type of capital structure ratio’s are as follows:

o Interest coverage ratio.
o Dividend coverage ratio.
o Total fixed charges coverage ratio.
o Cash flow coverage ratio.
o Debt services coverage ratio.

Liquidity ratios

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Liquidity ratios:

It is the ability of the firm to meet its obligations when they are in due for payment at the time of overstressed.

It is to measure the ability of firm to meet its short term obligations and reflect the short term financial strength/solvency of a firm.

The ratio which indicates the liquidity of the firm are

ØNet working capital

ØTurnover ratio

ØCurrent Ratio

ØTest/Quick ratio

Ø Super quick ratio

Ø Defensive-interval ratios

Ø Cash flow from operations ratio

Types of Ratios

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Types of Ratios

Liquidity ratios,

Capital structure/ leverage ratios

Profitability ratios

Activity/Efficiency ratios

Integrated analysis of ratios

Growth ratios

Ratio Analysis

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Ratio Analysis:

It is very helpful for the analysis of financial purpose.

It is helpful for the purpose of comparing of risk and relationship between firms of different sizes.

It is used to determine strength and weakness of firm and past performance of the firm can be determined.

It helpful to determine current financial conditions of the firm.

Ratio refers to numerical or quantitative relationship between two variables/items.

It doesn’t give improvement in financial or business earnings but it is helpful to estimate where the financial or business earnings gone low or its gone high, and also it helps to determine to get the view of where the performance lagging.

It gives information on the data which we arrived in performance of business.

Types of Ratios

Direct Method Cash Flow Statement

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Direct Method Cash Flow Statement

Cash flow From Operating Activities

Cash receipts from customers

Cash paid to suppliers and employees

Cash generated from operations

Income tax

Cash flow before extraordinary items

Proceeds from earthquake disaster settlement

Net cash from operating activities

Cash flow from Investing Activities

Purchase of fixed assets

Proceeds from sale of operations

Interest received

Dividends received

Net cash from investing activities

Cash flow from Financing Activities

Proceeds from issuance of share capital

Proceeds from long-term borrowings

Repayments of long-term borrowings

Interest paid

Dividends paid

Net cash used in financing activities

Net increase in Cash and Cash-equivalents*

Cash and cash-equivalents at the beginning of a period

Cash and cash-equivalents at the end of a period

Cash Flow from Business Operations (Indirect Method)

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Cash Flow From Business Operations(Direct Method)

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Cash Flow Statement of Hypothetical Limited.

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Budget Details - India

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Budget Hints for 2009-10:

MAT hiked from 10% to 15%.
CTT to be abolished(Commodities Transaction Tax).
FBT abolished(Fringe Benefit Tax).
Surcharge of 10% on personal income tax removed.
STPI extended by 1 year.
Surcharge on corporate tax to continue.
To introduce new investment linked tax SOPS.
To create resolution for TP disputes(Transfer Pricing).
No STT on sale/purchase of shares by NPA trust(Non Performing Asset).
Personal tax exemption raised of Rs.10000/- for man, woman and Rs.15000/- for senior citizens.
Footwear to become Cheaper.
Mobile phones to be more expensive.
Carry forward period for MAT credit increased from 7Yrs. To 10 Yrs.
Tax holiday for exporters extended to 2011.
National pension scheme exempt from STT.
Meaning of Charitable purpose redefined.
Customs duty on gold bars raised.
Customs duty on LCD panels reduced.
4% Excise duty on cotton textiles restored.
Customs duty on Bio-diesel reduced.
5% customs duty on set top box.
8% excise duty on man made and yarn products.
Exemption on branded jewellery – excise
Presumptive taxation to biz tax
Section 80dd enhanced from Rs.75000/- to Rs.100000/-.
5% on reduction on small bulk drugs – customs.
To introduce GST on 1^st April 2010.
Fiscal deficit projected at 6.8%
Growth expectation of 9%

Cash Flow Statement

2009-07-09T17:26:00.000-07:00

Just we are on the starting of Cash Flow Statement ahead of our blog. So please co-operate with us and comment. You can also send us your project to post in our blog.

This is for all accounting professionals and for those who want to know about accounting knowledge personalities too.

I came through one personal who studied CA, but doesn't some trading a/c like myself.

So i want to open site which helps them to get the knowledge about accounting side.

Cash Flow Statement:

Cash Flow Statement is called as 3^rd Financial Statement of a company.
It helps to identify both cash inflow and outflow of a company.

Objectives:
To provide information about the cash flows associated with Operating, Investing and Financing activities of the firm during the accounting period.
Significance:
It will be helpful for the stake holders of the company.
It helpful for dividend payable.
Interest Payment.
Debt repayment.
Payment to employees.
Payment to Suppliers.
Taxes etc.,

Meaning:
It is a statement of indicating sources of cash inflows and transactions of cash outflows of a firm during an accounting period.
Activities which generates cash inflows – sources of cash.
Activities which cause cash outflows – uses of cash.
Usefulness:
To find out cash generated out of normal business Operating activities/Operations of a company.
Find out the details about obtained cash out of financial activities.
Find out the cash spending on investment activities – purchase of assets etc.,
In what ways redemption of shares and debentures occurred.
Proportion of debt and equity for cash raised from outside.
Companies borrowing for the purpose of dividends.

Liquidity position of company is improved

Cash Flow Statement of Hypothetical Limited
Cash Flow from Business Operations(Direct Method)
Cash Flow from Business Operations(Indirect Method)
Direct Cash Flow Statement

Studies

2009-07-09T17:22:00.000-07:00

All you can find here about studies related things,

where we want to develop and diversify the blog in different aspects of things,

so we are now for you to come in new stuff like creating you about ideas of how to study and also your queries will be solved in this blog.

This is for the purpose of creating you awareness about where your accounting knowledge used.

Kindly send us your comments.