Asset accounting: Cash

1
Asset accounting Cash
2
Issues for discussion

• Why is the cash not same as profit?
• Why the various cash flows?
• Why is it necessary to understand the composition
  of cash flows?
• Reporting of CF is governed by AS-3

3
Cash in hand Receipts - Payments

• Receipts
• Cash Sales (CFO)
• Collections from Customers
• Loan (CFF)
• Capital (CFF)
• Interest R (CFI)
• Dividend (CFI)
• Rent receied ( CFI )
• Maturity of investments (bonds/Debenture)
• Sale of investment
• Sale of FAssets

• Payments
• Payment to the suppliers (CFO)
• Salary/expenses paid (CFO)
• Purchase of stock (CFO)
• Interest paid (CFF)
• Dividend paid (CFF)
• Repayment of loans (CFF)
• Buy back of capital (CFF)
• Purchase of Shares/Bonds (CFI)
• Purchase of fixed assets

4
CFF Cash From Financing Decisions

• Receipts
• Loan (CFF)
• Capital (CFF)
• Less
• Payments
• Interest paid (CFF)
• Dividend paid (CFF)
• Repayment of loans (CFF)
• Buy back of capital (CFF
• CFF

• CFF
• Positive
• Negative

5
CFI Cash from Investment Decisions

• Receipts
• Interest R (CFI)
• Dividend (CFI)
• Rent receied ( CFI )
• Maturity of investments (bonds/Debenture)
• Sale of investment
• Sale of FAssets
• Less Payments
• Purchase of Shares/Bonds (CFI)
• Purchase of fixed assets

• CFI
• Positive
• Negative

6
CFO Cash from Operating decisions

• Receipts
• Cash Sales (CFO)
• Collections from Customers
• Less
• Payments
• Cash purchase of stock
• Payment to the suppliers (CFO)
• Salary/expenses paid (CFO)
• Purchase of stock (CFO

• CFO
• Positive CFO
• Negative CFO

7
CIH

• CFF
• CFI
• CFO Why is CFO not same as Profit ?
• Accrual
• Matching

8
CFO

• Direct Method
• Sales
• Collections
• Less
• Cash expenses

• Indirect method
• Profit
• Add/less
• Non cash expenses
• Credit Expenses
• Non-operating Expenses
• Non-operating incomes

9
Why is the Profit not same as CFO?

• Non-cash items (dep/Amortisation/Baddebts)
• Non-operating items
• ( interest and dividend)
• Credit items (credit sales/expense/purchase)

10
CFS

• Opening CIH
• CFF
• CFI
• CFO
• Closing CIH