CASH FLOW STATEMENT

                          INTRODUCTION  OF CASH FLOW STATEMENT 
Cash flow statement is an essential part of business. In simple words, cash flow is the money that comes in and out of the business. Preparing the statement cash flow is very important for your business as this will be helpful in analyzing the cash income and expenditures during a designated time period. If you are unaware of the essentiality of cash flow statement and looking for the reliable information on this subject then you have just reach the best online resource.
There are different components to consider while preparing a statement of cash flow. To be successful businessmen one requires preparing funds flow statement and should understand its advantages. Business failures result from poor cash flow management skills. Thus, preparing cash flow statements might always help your business to avoid running out of money. Go ahead and check out our articles to gather major information on cash flow statement and its essential basics.

Definition of 'Cash Flow Statement'

                One of the quarterly financial reports any publicly traded company is required to disclose to the SEC and the public. The document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarte
 

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Aim of a cash flow statement;

The aim of a cash flow statement should be to assist users:

· to assess the company's ability to generate positive cash flows in the future
· to assess its ability to meet its obligations to service loans, pay dividends etc
· to assess the reasons for differences between reported and related cash flows
· to assess the effect on its finances of major transactions in the year.

Cash Flow From Financing Activities

Outside financing activities can be related to cash inflows out of primary (new emission) stocks of bonds selling or of additional borrowings submitted by banks on one side, while cash outflows can represent paying back a bank loan, dividend payments or buying back its own common stocks.

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Cash Flow From Investing Activities'

When analyzing a company's cash flow statement, it is important to consider each of the various sections which contribute to the overall change in cash position. In many cases, a firm may have negative overall cash flow for a given quarter, but if the company can generate positive cash flow from its business operations, the negative overall cash flow may be a result of heavy investment expenditures, which is not necessarily a bad thing.

Cash Flow From Operating Activities

Operating cash flow is the cash that a company generates through running its business.

It's arguably a better measure of a business's profits than earnings because a company can show positive net earnings (on the income statement) and still not be able to pay its debts. It's cash flow that pays the bills!

You can also use OCF as a check on the quality of a company's earnings. If a firm reports record earnings but negative cash, it may be using aggressive accounting techniques.

PROPERTY PLANT AND EQUIPMENT

Definition;

Assets of a company having physical existence and expected to be used for a period exceeding one year form a part of property, plant and equipment. Property, plant and equipment are alternatively referred to as tangible fixed assets.

 Explanation 
 
An example of a business with a high amounts of PP&E would be a shipping company, because most of its assets would be tied into its fleet of ships and administrative buildings. On the other hand, a management consulting firm would have less PP&E, because a consultant would only need a computer and an office in a building to run its operations.

This item is listed separately in most financial statements because PP&E is treated differently in accounting statements. This is because improvements, replacements and betterments can pose accounting issues depending on how the costs are recorded.
Objective;
             The objective of this Standard is to prescribe the accounting treatment for property,
            plant and equipment so that users of the financial statements can discern information
            about an entity’s investment in its property, plant and equipment and the changes in
            such investment.  The principal issues in accounting for property, plant and equipment
           are the recognition of the assets, the determination of their carrying amounts and the
            depreciation charges and impairment losses to be recognised in relation to them.
Important components of property, plant and equipment

1. Land and land improvements
2. Buildings
3. Plant and machinery
4. Vehicles
5. Equipment, etc

Property, plant and equipment are tangible items that:

(a) are held for use in the production or supply of goods or services, for rental to
others, or for administrative purposes; and
(b) are expected to be used during more than one period.

The cost of an item of property, plant and equipment shall be recognised as an asset if,

(a) it is probable that future economic benefits associated with the item will flow to
the entity; and
(b) the cost of the item can be measured reliably

Measurement at recognition: An item of property, plant and equipment that qualifies
for recognition as an asset shall be measured at its cost.

The cost of an item of property, plant and equipment comprises:
 
(a) its purchase price, including import duties and non-refundable purchase taxes,
after deducting trade discounts and rebates.
(b) any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management.
(c) the initial estimate of the costs of dismantling and removing the item and restoring
the site on which it is located, the obligation for which an entity incurs either
when the item is acquired or as a consequence of having used the item during a
particular period for purposes other than to produce inventories during that period.

The carrying amount of an item of property, plant and equipment shall be
derecognised: 

(a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal.