Class 12 Accountancy - KERALA
Cash Flow Statement
The Cash Flow Statement chapter in Class 12 Accountancy under the Kerala SCERT syllabus introduces students to AS-3 (Accounting Standard 3) guidelines on tracking the inflow and outflow of cash and cash equivalents. It matters greatly for board exams because it routinely features a major 8-mark numerical problem requiring the preparation of cash flows from Operating, Investing, and Financing activities using the indirect method. Mastering non-cash adjustments like depreciation and working capital changes is essential for scoring high.
Start Learning FreeKey Concepts
Operating Activities
Principal revenue-generating activities of the enterprise, calculated by adjusting net profit for non-cash items and working capital changes.
Investing Activities
Acquisition and disposal of long-term assets and other investments not included in cash equivalents, such as the sale or purchase of machinery and land.
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 or paying dividends.
Cash and Cash Equivalents
Short-term, highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of changes in value.
Indirect Method
The standard method prescribed for Class 12 where net profit or loss is adjusted for the effects of transactions of a non-cash nature.
Important Formulas
Board Exam Info
In the Kerala SCERT Class 12 Accountancy board examination, this chapter typically carries around 8 to 12 marks. The standard question pattern includes one comprehensive 8-mark numerical problem asking for the preparation of a Cash Flow Statement using the indirect method, alongside 1 or 2 objective or short-answer questions classifying specific transactions into operating, investing, or financing activities.
Frequently Asked Questions
Is the direct method asked in the Kerala SCERT Class 12 exams?
No, the Kerala SCERT syllabus and board exams strictly follow the indirect method for preparing the Cash Flow Statement as per AS-3.
How do we treat proposed dividend of the current year versus the previous year?
The previous year's proposed dividend is added back to net profit (operating) and shown as an outflow (financing), while the current year's proposed dividend is generally ignored for cash flow purposes as it is proposed, not paid.
Are bank overdrafts treated as bank balances or financing activities?
In the Cash Flow Statement, bank overdrafts and cash credits are treated as components of Cash and Cash Equivalents, not as financing activities.
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