Class 12 Accountancy - ODISHA
Cash Flow Statement
The Cash Flow Statement chapter in Class 12 Accountancy under Odisha (BSE) syllabus focuses on tracking the inflow and outflow of cash and cash equivalents in a business enterprise. As per Accounting Standard-3 (AS-3), transactions are classified into three main activities: Operating, Investing, and Financing. Mastering this chapter is crucial for board exams because it routinely features a compulsory 6-mark or 8-mark long-answer numerical problem, alongside several objective questions. It tests your ability to analyze financial statements and understand the actual liquidity position of a company beyond mere net profit.
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 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 debentures, and paying dividends.
Cash and Cash Equivalents
Highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of changes in value, including cash in hand, bank balances, and short-term marketable securities.
Indirect Method
A method of calculating operating cash flows where net profit or loss is adjusted for the effects of non-cash transactions, non-operating items, and changes in working capital.
Important Formulas
Board Exam Info
In the Odisha (BSE) Class 12 Accountancy board examination, the Cash Flow Statement chapter generally carries around 8 to 10 marks. Students can regularly expect one long-answer numerical question worth 6 marks requiring the preparation of a complete Cash Flow Statement using the indirect method, supplemented by 2 to 4 objective or short-answer questions testing the classification of specific transactions.
Frequently Asked Questions
How do we know whether a particular transaction is an operating, investing, or financing activity?
Look at the core nature of the item: day-to-day business operations relate to Operating, purchase/sale of fixed assets and investments relate to Investing, and raising or repaying capital/loans relates to Financing.
Is the direct method asked in the Odisha BSE board exams?
No, according to the prescribed syllabus for Class 12 Odisha BSE, questions involving Cash Flow Statements are almost exclusively solved using the Indirect Method.
How is Proposed Dividend treated in the Cash Flow Statement?
The previous year's proposed dividend is added back to net profit to find net profit before tax (as it is treated as a non-operating charge or paid during the current year) and the current year's proposed dividend is generally ignored or dealt with as a contingent liability unless specified otherwise.
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