State the Primary Objective of Preparing a Cash Flow Statement (2024)

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Analysing Comparative Balance Sheet

State the Pri...

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The primary objective of preparing a cash flow statement is to study and report the flow of cash and cash equivalents of a business during an accounting period.
See Also
Small Business Accounting: Using a Cash Flow Statement - Oregon Small Business Development Center Network What is free cash flow? Why is it the most important measure of cash flow? | Homework.Study.com
Also read:
Cash Flow Statement
What Is Operating Cash Flow
Preparation of Cash Flow Statement
Cash Flow Operating Activities
Classification of Activities in Cash Flow Statement
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What are the objectives of preparing cash flow statement?

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Q. Objective Type Questions :
State whether following statements are true or false :

Purchase of fixed asset is operating cash flow.

Describe the procedure to prepare Cash Flow Statement.

Q. Prepare Cash Flow Statement from the following Balance Sheet:

Particulars	Note No.	31st March, 2013 (₹)	31st March, 2012 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		6,00,000	5,00,000
(b) Reserves and Surplus	1	4,00,000	2,00,000
2. Current Liabilities
(a) Trade Payables		2,80,000	1,80,000
Total		12,80,000	8,80,000
II. ASSETS
1, Non-Current Assets
(a) Fixed Assets:
Plant and Machinery		5,00,000	3,00,000
2. Current Assets
(a) Inventories		1,00,000	1,50,000
(b) Trade Receivables		6,00,000	4,00,000
(c) Cash and Cash Equivalents		80,000	30,000
Total		12,80,000	8,80,000

Notes to Accounts

Particulars	31st March, 2013 (₹)	31st March, 2012 (₹)
I. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit and Loss	4,00,000	2,00,000

Additional Information:
(i) An old machinery having book value of ₹50,000 was sold for ₹60,000.
(ii) Depreciation provided on Machinery during the year was ₹30,000.

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