Class 12 Accountancy - CBSE
Cash Flow Statement
The Cash Flow Statement chapter in CBSE Class 12 Accountancy focuses on tracking the inflow and outflow of cash and cash equivalents in an enterprise. As per Accounting Standard-3 (AS-3), transactions are classified into three main activities: Operating, Investing, and Financing. This topic is a high-scoring and mandatory part of the board exam, usually appearing as a 6-mark or 8-mark long-answer question. Mastering this chapter requires a clear understanding of non-cash adjustments, working capital changes, and the strict formatting mandated by the CBSE board.
Start Learning FreeKey Concepts
Operating Activities
Principal revenue-generating activities of the enterprise, calculated starting from Net Profit Before Tax and Extraordinary Items with adjustments for non-cash and non-operating items.
Investing Activities
Acquisition and disposal of long-term assets and other investments not included in cash equivalents, such as the purchase or sale of machinery, land, and receipt of interest or dividends.
Financing Activities
Activities that result in changes in the size and composition of the owner's capital and borrowings of the enterprise, such as issuing shares, raising bank loans, or paying dividends.
Cash and Cash Equivalents
Comprises cash on hand, demand deposits with banks, and highly liquid short-term investments that are readily convertible to known amounts of cash with insignificant risk of changes in value.
Non-Cash Transactions
Adjustments made to net profit for items like depreciation, goodwill written off, and provision for doubtful debts that do not involve actual cash movement.
Important Formulas
Board Exam Info
In the CBSE Class 12 Accountancy board exam, the Cash Flow Statement typically carries around 6 to 8 marks. Questions usually feature a full-fledged 6-mark practical problem where you must prepare the complete Cash Flow Statement using comparative balance sheets with additional adjustments like accumulated depreciation or tax provisions.
Frequently Asked Questions
Are bank overdrafts and cash credits considered part of Cash Equivalents?
No, bank overdrafts and cash credits are treated as short-term borrowings and are classified under Financing Activities, unlike cash and bank balances.
How do we treat proposed dividend of the current year versus the previous year?
The previous year's proposed dividend is added to net profit to find profit before tax and shown as an outflow under financing activities when paid. The current year's proposed dividend is generally ignored for the cash flow statement until approved.
Is it compulsory to write working notes in the board exam?
Yes, preparing ledger accounts like Accumulated Depreciation, Provision for Tax, or Fixed Assets as working notes is essential because CBSE awards step marks for them.
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