What Is Cash Flow Statement? Before 1988, the Cash flow Statement was not regarded as an integral part of the Financial Statements. Rather, it was prepared as an additional statement to Financial Statements. At that time sources of quick assets and the use of these were shown in this statement and the nomenclature of this statement, as per IAS, was “Statement of Changes in Financial Position.”
At that time the use of the term FUND created some confusion. Some people were using Fund as cash whereas some people were meaning Fund for working capital. On the other hand use of Cash Flow Statements was increasing.
To eliminate the problem of using the Fund Flow Statement [Statement of Financial Changes] the Financial Statement Standard Board (FASB) in the year 1988 revised it’s Standard No. 7 i.e., Statement of Financial Changes, which was promulgated in 1977, by promulgating the Cash Flow Statements keeping the number of the Standard unchanged and made it an integral part of the Financial Statements.
Cash flow means the inflow and outflow of cash and cash equivalents during a period. If a statement is prepared with all the inflows and outflows of cash and cash equivalents for the period under review, then this statement will be called the cash flow Statements. All the cash inflows and cash outflows for a particular period can be known from this statement.
According to the Financial Accounting Standard no. 95,
“The cash flow statement reports the cash receipts, cash payment net, cash changes resulting from operating, investing, and financing activities during a period.”
According to Gupta & Sharma,
“A Statement of changes in the financial position of a firm on a cash basis is called a cash flow statement.”
According to the Companies Act, 1994, the preparation of Cash Flow Statements is not compulsory for the companies incorporated in Bangladesh. But listed companies are required to prepare and present Cash Flow Statements under Securities and Exchange Rules.
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