Definitions of Cash Flow Statement Chapter
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| Definition of Cash Flow Statement |
In
order to prepare cash flow statement in accordance with AS–3, it is necessary
to understand the meaning of different terms which have been used in this
standard. The following items have been used in this standard with the meaning
specified.
1. Cash-: Cash comprised cash in hand and demand deposit with
banks.
2. Cash Equivalents-: Cash equivalents are short-term, highly liquid
investment that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of charges in value.
3. Cash Flow-: Cash flow is inflow and outflow of cash and cash
equivalents.
4. Operating Activities-: Operating activities are the principle revenue producing activities of enterprise and
other activities that are not investing and financing activities.
5. Investing Activities-: Investing activities are the acquisition and disposal
of long term assets not include in cash equivalents.
6. Financing Activities-: Financing activities are activities that result of
changes in the size and compositions of owners’ capital (including preference
share and capital in the case of company) and borrowings of the enterprise.
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