Notes on lesson on Statement of Changes in Financial Position | kullabs.com

Statement of Changes in Financial Position

Meaning, objectives and preparation of statement of changes in financial position on working capital and cash basis- determination of funds operations. Cash Flow Statement and Funds Flow Statement.

Notes

Cash from Financial and Investing Activities

Financing activities section is where the sources of fund generated. Payment of cash dividend to shareholders and repayment of debt, both are financing activities. When the cash flow from financing activities is positive, it is called net cash flows from financing activities. But, if the result is negative, it is called net cash used by financing activities. Cash flow statement is prepared by combining all the cash flows from operating activities, financing activities and investing activities.

Cash Flow Statement under Direct and Indirect method

After the determination of cash flows from the operating activities, investing activities and financing activities, their results are calculated and added to ascertain the net change on cash and cash equivalents. If given net profit or any other irrelevant information but sales and other revenues are missing, in such case, cash flow statement is prepared under indirect method.