Class 12 Accountancy - MAHARASHTRA
Cash Flow Statement
The Cash Flow Statement chapter in Class 12 Accountancy under the Maharashtra Board (MSBSHSE) focuses on tracking the inflow and outflow of cash and cash equivalents for a business enterprise. As per Accounting Standard-3 (AS-3), students learn to classify business activities into three distinct categories: Operating, Investing, and Financing activities. This chapter is extremely crucial for board exams as it consistently features a compulsory 8-to-10-mark full-length practical problem, testing your ability to analyze financial statements and reconcile net profit with actual cash generated from business operations.
Start Learning FreeKey Concepts
Operating Activities
Principal revenue-producing 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 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 issue of shares, debentures, and payment of dividends or loan interest.
Cash and Cash Equivalents
Comprises 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, or loss on sale of assets that do not involve actual cash outflow or inflow and must be adjusted to calculate operating cash flow.
Important Formulas
Board Exam Info
In the Maharashtra State Board (MSBSHSE) Class 12 Accountancy paper, the Cash Flow Statement chapter typically carries around 8 to 10 marks. Questions usually appear as a compulsory full-length practical problem in the latter section of the question paper, requiring students to prepare a complete Cash Flow Statement using the Indirect Method based on two years of comparative balance sheets.
Frequently Asked Questions
Which method of preparing a Cash Flow Statement is prescribed for Class 12 MSBSHSE students?
Students are required to use the Indirect Method as per AS-3 (Revised), where the calculation begins with Net Profit Before Tax and Extraordinary Items.
Are proposed dividends added or subtracted while calculating operating profit?
The current year's proposed dividend is added back to net profit (as a non-cash/non-operating charge or appropriation) and the previous year's proposed dividend (if paid) is shown as an outflow under Financing Activities.
How do we treat bank overdraft and cash credit in a Cash Flow Statement?
Bank overdraft and cash credit are generally treated as financing activities (short-term borrowings) and form part of financing cash flows, whereas they are also included in the closing balance of cash and cash equivalents depending on the specific problem format.
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