Cash Flow Statement
Class 12 · Accountancy
3 ideas in Class 12 Accountancy, explained in plain words, with games and quizzes to practise.
Cash, Equivalents and Activity Classes
Part of: Sorting cash movements
A cash flow statement tracks cash and cash equivalents: cash in hand, bank balances and short deposits of 3 months or less. Every flow joins one of three activities: operating for main business, investing for assets and investments, and financing for owners and lenders. For example, cash 30000 with bank 40000 and short deposits 30000 makes 100000 of cash and equivalents.
Why it matters. Profit and cash part ways through credit and timing. Sorting flows shows whether cash came from trading strength or from selling assets and borrowing.
Formulas
- Cash and equivalents = Cash + Bank + Short deposits
- Operating = Main business flows
- Investing = Asset and investment flows
Key words
- Cash equivalents
- : Quick deposits under 3 months.
- Operating flows
- : Main business cash moves.
- Investing flows
- : Asset deal cash moves.
- Financing flows
- : Owner and lender cash moves.
Try it in two minutes
- Pour 3 cups: cash in hand, bank, short deposits. Ask: what is the total?
- Sort 9 slips: sales, machines, loans into 3 activity trays.
- Move a bank's interest slip to operating but a maker's to financing. Ask: why different?
Try at home. Cash 20000, bank 60000, 2-month deposits 20000. Find cash and equivalents.
Operating Activities by the Indirect Route
Part of: Sorting cash movements
The indirect route starts from profit before tax, adds back non-cash charges like depreciation and non-operating losses, and removes non-operating gains. Then working capital moves adjust it: a rise in stock or debtors subtracts, a fall adds, and a rise in payables adds. Tax paid is the last cut. For example, profit of 200000 with add-backs of 50000 and a gain of 15000 gives 235000 before working capital.
Why it matters. Profit hides unpaid and non-cash items. Rebuilding cash step by step shows what trading truly generated.
Formulas
- Operating profit = PBT + Non-cash + Non-operating items
- Cash from ops = Operating profit + WC inflow - WC outflow - Tax paid
- Rise in current asset = Cash outflow
Key words
- Indirect route
- : Cash rebuilt from profit.
- Non-cash charge
- : Cost spending no cash.
- Working capital move
- : Stock, debtor or due shift.
- Tax paid
- : Last cash cut on profit.
Try it in two minutes
- Start with profit 200000 and add back 40000 of wear plus 10000 of sale loss.
- Remove the 15000 land gain. Ask: why does a gain leave?
- Adjust stock up 20000, debtors down 30000, dues up 10000. Ask: which way does each move cash?
- Cut tax paid 40000 last. Ask: what is left?
Try at home. Profit 100000, depreciation 20000, stock up 10000, debtors down 15000. Find cash before tax.
Investing and Financing Flows
Part of: Investing, financing and reading the statement
Investing flows cover long assets and investments: purchases go out, sale proceeds and interest or dividends received come in. Financing flows cover owners and lenders: share and loan proceeds come in, while repayments, interest paid and dividends paid go out. Sale proceeds equal the sold book value plus any gain. For example, sold book value of 40000 with a gain of 5000 gives proceeds of 45000.
Why it matters. Mixing asset sales with trading cash flatters operations, and hiding repayments understates burden. Clean trays keep the story honest.
Formulas
- Sale proceeds = Net book value + Gain on sale
- Net financing = Inflows - Outflows
- Sold book value = Opening + Bought - Wear - Closing
Key words
- Sale proceeds
- : Cash received from sale.
- Net book value
- : Cost less wear so far.
- Proceeds of issue
- : Cash from fresh capital.
- Repayment
- : Cash paying back loans.
Try it in two minutes
- Open machines 300000, add bought 100000, cut wear 40000, close 320000. Ask: what book value left the door?
- Add the 5000 gain to find proceeds of 45000. Ask: investing in or out?
- Net shares 200000 less repaid 50000 less dividend 30000. Ask: financing up or down?
Try at home. Shares issued 100000, loan repaid 40000, dividend paid 20000. Find net financing cash.
What your child will practise
- Cash, Equivalents and Activity Classes: Candy Puzzle (Clue Puzzle)
- Cash, Equivalents and Activity Classes: Candy Quick Fire (Quick Fire)
- Investing and Financing Flows: Desert Puzzle (Clue Puzzle)
- Investing and Financing Flows: Desert Quick Fire (Quick Fire)
- Operating Activities by the Indirect Route: Candy Quest (Flip and Match)
- Quiz: Cash, Equivalents and Activity Classes (8 questions)
- Quiz: Investing and Financing Flows (8 questions)
- Quiz: Operating Activities by the Indirect Route (8 questions)