Question

Explain the meaning and objective of cash flow statement​

Answer 1

Answer:

A cash flow statement means statements relating to information regarding the inflow and outflow of cash. ... The primary objective of the cash flow statement is to help management in taking a decision and making a plan by providing current information on cash inflow and outflow of any accounting period.

Answer 2

A cash flow statement shows the in flows and outflows of cash and cash equivalents from operating, investing and financing activities of a business enterprise.

Explanation:

A cash flow statement or a statement of cash flows is a statement which shows the in flows and outflows of cash and cash equivalents from operating, investing and financing activities of a business enterprise during the accounting period.

Objectives:

1. Information about cash flows from operating, investing and financing activities: Income statement does not provide information about cash inflows and cash outflows of a business enterprise and it is desirable to know these cash flows. Therefore, one of the purposes of cash flow statement is to show cash inflows and cash outflows of cash and cash equivalents.
2. Basis to assess the ability of an enterprise to generate cash and cash equivalents: Cash flow statement provides information to the users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents.
3. Basis to assess the needs to utilise cash flows: Information about cash flows of an enterprise is useful in providing users of financial statements with a basis to assess the needs of the enterprises to utilise cash flows.
4. Timing and certainty of generating cash and cash equivalents: Cash flow statement gives information to the users of financial statements about the ability of an enterprise to generate cash and cash equivalents and the timing and certainty of their generation.