Class 12 Accountancy - MP
Cash Flow Statement
The Cash Flow Statement chapter in Class 12 Accountancy under the MPBSE curriculum focuses on the inflow and outflow of cash and cash equivalents of an enterprise. Students learn to classify business activities into three distinct categories as per Accounting Standard-3 (AS-3): Operating, Investing, and Financing activities. This chapter holds significant weight in the board examinations, usually featuring a mandatory 6 to 8-mark numerical problem. Mastering this topic requires a clear understanding of non-cash adjustments, working capital changes, and the exact format prescribed for financial analysis, making it a high-scoring area for diligent students.
Start Learning FreeKey Concepts
Operating Activities
Principal revenue-producing activities of the enterprise and other activities that are not investing or financing.
Investing Activities
Acquisition and disposal of long-term assets and other investments not included in cash equivalents.
Financing Activities
Activities that result in changes in the size and composition of the owner's capital and borrowings of the enterprise.
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.
Non-Cash Items
Expenses or incomes like depreciation, goodwill written off, or provisions that do not involve actual outflow or inflow of cash.
Important Formulas
Board Exam Info
In the Madhya Pradesh Board (MPBSE) Class 12 Accountancy exam, the Cash Flow Statement typically carries around 6 to 8 marks. The question paper usually features one mandatory long-answer numerical question where students are required to prepare a Cash Flow Statement from a given comparative balance sheet and additional information.
Frequently Asked Questions
Is AS-3 mandatory for preparing a Cash Flow Statement in MPBSE exams?
Yes, Cash Flow Statements must be prepared strictly in accordance with Accounting Standard-3 (Revised) as prescribed by the ICAI and followed by the board.
How do we treat proposed dividend of the current year and previous year?
The previous year's proposed dividend is added back to operating activities (as non-cash/non-operating expense) and shown as an outflow in financing activities when paid. Current year's proposed dividend is generally ignored for the cash flow statement until approved.
What is the difference between Cash Flow Statement and Fund Flow Statement?
A Cash Flow Statement tracks only the movement of cash and cash equivalents, whereas a Fund Flow Statement tracks the changes in working capital and overall financial resources of a business.
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