Class 12 Accountancy - WEST-BENGAL
Cash Flow Statement
The Cash Flow Statement chapter in Class 12 Accountancy under the WBBSE curriculum focuses on the inflow and outflow of cash and cash equivalents of a business enterprise. As per Accounting Standard-3 (AS-3), this statement is divided into three distinct activities: Operating, Investing, and Financing. Understanding this chapter is crucial for students as it provides deep insights into the liquidity and solvency of a company. In the board examinations, it consistently features as a major long-answer question carrying substantial marks, making numerical practice and format mastery essential for scoring high.
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 equity and borrowings of the enterprise.
Cash and Cash Equivalents
Comprises cash on hand, demand deposits with banks, and short-term, highly liquid investments readily convertible to known amounts of cash.
Non-Cash Items
Expenses or incomes like depreciation and goodwill written off that do not involve actual cash outflow or inflow and are adjusted in net profit.
Important Formulas
Board Exam Info
In the West Bengal Council of Higher Secondary Education (WBCHSE) Class 12 Accountancy exam, the Cash Flow Statement usually carries around 8 to 10 marks. Questions typically feature a 6 or 8-mark compulsory numerical problem requiring the preparation of a complete Cash Flow Statement using comparative balance sheets, along with 1-mark objective or short answer questions.
Frequently Asked Questions
What is the difference between Cash Flow Statement and Fund Flow Statement?
A Cash Flow Statement deals strictly with the movement of cash and cash equivalents, whereas a Fund Flow Statement deals with the changes in working capital and overall financial resources of a business.
Are bank overdrafts treated as cash equivalents in AS-3?
No, bank overdrafts are generally considered as financing activities and are included as a component of financing cash flows, though they are subtracted from cash and cash equivalents only to calculate the closing balance of cash in specific contexts.
How is proposed dividend treated in a Cash Flow Statement?
The proposed dividend of the previous year is added to net profit to calculate net profit before tax and also shown as an outflow under Financing Activities, while the current year's proposed dividend is ignored for the current year's cash flow statement.
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