DK Goel Solutions Class 12 Accountancy Volume 2 Chapter 6

Class 12 DK Goel Solutions Volume 2 Chapter 6 - Cash Flow Statement

Cash flow is a financial statement which details the inflow and outflow of funds and its equivalent. This statement is usually prepared by a company to determine the usage of money and financial transactions which occur during a period. Download free Pdfs of Dk Goel Solutions Class 12 Volume 2 for Your Better Performance in Examination.

DK Goel Solutions Class 12 Accountancy Volume 2 Chapter 6 Cash Flow Statement part-1
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FAQ (Frequently Asked Questions)

Q1. What is Cash From Operating Activities?

Ans. Cash from operating activities falls in the first section of the cash flow statement. It focuses on operating activities regarding the cash inflows and outflows from a company’s main business activities. A company spends money on activities like buying or selling assets, merchandise, offering services, etc.

A company’s operating activities include the activities like Issue of share capital, equity shares, the dividend paid and interest paid on debentures, the redemption of debentures and preference shares and repayment of a long-term loan. While activities like an investment in buying and selling property, equipment, long-term investments, borrowing and repaying short-term and long-term debt, buying back shares of stock and paying dividends don’t fall under it.

Q2. What are Financial Activities?

Ans. Financing activities refers to the cash flow from the financing activities of a company. It falls under one of the central sections in the cash flow statement where the cash inflow and outflow are calculated. It includes borrowing and repayment of long-term loans, standard or preferred stock, issuing a company shares, paying cash dividends on capital stocks, etc.

When a company borrows cash for a period and a corporation issues bonds of its common stock and receives money, the proceeds are reported as a positive amount in the statement. This will make sure that the readers get a positive image of the company, thereby increasing its cash and cash equivalents. At the same time, when a company repays the amount and redeems any bonds or purchases its share of treasury stock, the amount of cash is reported as a negative amount.

Q3. What is Included in Cash and Cash Equivalents?

Ans. Cash equivalents are the high liquid investments which are short term with a maturity date of three months or less at the time of purchase. There is little or no risk of collecting the full amount of being reported in cash equivalents. Usually, a combined amount of cash and cash equivalent is added in the balance sheet as the current assets. The cash is the total sum invested or rolled by the company for the smooth functioning of the company.

Cash equivalents usually include commercial papers, money market amount, treasury bills, etc. In contrast, cash includes checks received from a client which isn’t deposited, checking accounts, petty cash and coins and currency.

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