Preparation of Cash Flow Statement

The principal difference between a funds-flow statement and the cash flow statement lies in the amount shown as funds provided by business operations. Therefore, from the point of preparing a cash flow statement, funds from business operations are to be adjusted so as to obtain cash from operations. Most of the other items reported in the funds flow statement generally involve cash receipts or payments -- for example, issue of equity shares or preference shares, redemption/repayment of debentures/long-term loan, sale or purchase of non-current assets like equipment, building and so on. Since these items affect cash flows, their treatment in the cash flow statement is the same as in the funds flow statement.

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