Class 12 Accountancy - KARNATAKA
Cash Flow Statement
The Cash Flow Statement chapter in Class 12 Accountancy under Karnataka (KSEEB) syllabus deals with the inflow and outflow of cash and cash equivalents of an enterprise during a specific period. You will learn to classify cash flows into three main activities: Operating, Investing, and Financing, as per AS-3 (Revised). This chapter is extremely crucial for your board exams as it usually features a compulsory 6-mark or 8-mark full-length practical problem. Mastering the format and adjustments for non-operating items, depreciation, and working capital changes will help you secure full marks in this high-scoring section.
Start Learning FreeKey Concepts
Operating Activities
Principal revenue-generating activities of the enterprise, such as cash receipts from the sale of goods and services and cash payments to suppliers and employees.
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, debentures, or paying bank loans and dividends.
Cash and Cash Equivalents
Includes cash on hand, demand deposits with banks, and short-term, highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of changes in value.
Non-Cash Items
Expenses or incomes like depreciation, goodwill written off, and provision for doubtful debts that do not involve actual cash outflow or inflow but affect net profit.
Important Formulas
Board Exam Info
In the Karnataka (KSEEB) Class 12 Accountancy board exam, the Cash Flow Statement chapter generally carries around 8 to 12 marks in total. Students can consistently expect one compulsory long-answer practical problem worth 6 or 8 marks, requiring the preparation of a complete Cash Flow Statement using indirect method, along with one or two 1-mark or 2-mark conceptual questions.
Frequently Asked Questions
Why is the indirect method preferred over the direct method in board exams?
The indirect method is standard in the KSEEB syllabus as it starts with Net Profit Before Tax and adjusts non-cash items, making it easier to solve using standard balance sheet data usually provided in exam problems.
How do we treat proposed dividend and provision for tax in Cash Flow Statements?
Current year's provision for tax is added back to find net profit before tax and then subtracted as tax paid. Proposed dividend of the previous year is added to operating activities and treated as an outflow under financing activities when paid.
Are bank overdrafts treated as bank balances or financing activities?
In the KSEEB curriculum, bank overdrafts and cash credits are generally treated as financing activities or as a component of cash and cash equivalents depending on specific problem guidelines, but traditionally classified under financing activities unless specified as short-term borrowings.
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