Class 12 Accountancy — Chapter 6: Cash Flow Statement
Chapter 6: Cash Flow Statement is a chapter in Class 12 Accountancy (Part 2), part of the CBSE NCERT curriculum followed by over 25 million students across India. This chapter covers 8 topics including Introduction and Purpose of Cash Flow Statement, Cash and Cash Equivalents, Classification of Activities. BrainWeave provides free AI-powered explanations — by voice or text, in Hindi or English — with no signup required.
What you'll learn
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▸Introduction and Purpose of Cash Flow StatementCore conceptAS-3inflowsoutflowsfinancial statementpurpose
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▸Cash and Cash EquivalentsCore conceptcash equivalentsshort-term investmentshighly liquidmarketable securitiesthree months
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▸Classification of ActivitiesCore conceptoperating activitiesinvesting activitiesfinancing activitiesclassificationAS-3
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▸Cash Flow from Operating ActivitiesCore conceptoperating activitiesprincipal revenuenet profitsuppliersincome tax
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▸Cash Flow from Investing ActivitiesCore conceptinvesting activitiesfixed assetslong-term assetsacquisitiondisposal
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▸Cash Flow from Financing ActivitiesCore conceptfinancing activitiesissue of sharesdebenturesrepayment of loansdividend paid
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▸Benefits of Cash Flow Statementbenefitsliquiditysolvencycomparabilityfinancial structure
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▸Methods of Preparing Cash Flow Statementdirect methodindirect methodpreparationnon-cash itemsnet profit adjustment
Chapter Summary
Understand what a Cash Flow Statement is, its role as a key financial statement according to AS-3, and its primary purpose of showing the inflows and outflows of cash and cash equivalents over a period.
Define and identify items that constitute 'Cash' (cash in hand, demand deposits) and 'Cash Equivalents' (short-term, highly liquid investments with a maturity of three months or less).
Learn the fundamental classification of all business transactions into three distinct categories for the purpose of preparing a Cash Flow Statement: Operating, Investing, and Financing activities.
Identify and calculate cash flows from the principal revenue-producing activities of the enterprise. This includes cash receipts from sales and cash payments to suppliers and employees.
Identify and calculate cash flows related to the acquisition and disposal of long-term assets and other investments not included in cash equivalents, such as purchase of machinery or sale of non-current investments.
Identify and calculate cash flows resulting from changes in the size and composition of the owner's capital and borrowings of the enterprise, such as issuing shares, raising loans, or paying dividends.
Understand the utility of the Cash Flow Statement in assessing an enterprise's ability to generate cash, evaluating its liquidity and solvency, and enhancing the comparability of operating performance.
Distinguish between the two methods of preparing the Cash Flow from Operating Activities section: the Direct Method (showing major classes of gross cash receipts and payments) and the Indirect Method (adjusting net profit or loss for non-cash items).
Practice Questions from this Chapter
Tap "Get Solution" on any question to ask our AI tutor.
- Explain cash flow statement's purpose. Get Solution →
- List three types of business cash flow. Get Solution →
- Give real-world cash flow examples. Get Solution →
- Which of the following is NOT one of the three primary financial statements mentioned in the chapter's introduction? Get Solution →
- According to AS-3, what are the three classifications of activities in a Cash Flow Statement? Get Solution →
- As per the definition in AS-3, 'Cash' comprises cash in hand and what else? Get Solution →
- What is the typical maximum maturity period from the date of acquisition for an investment to qualify as a 'cash equivalent'? Get Solution →
- Which category of activities are described as the principal revenue-generating activities of an enterprise? Get Solution →
Did you know?
- 💡 Ancient Lydians created the first known coins over 2,600 years ago.
- 💡 The world's fastest money moves electronically at nearly the speed of light.
- 💡 On Yap Island, giant stone wheels called Rai once served as currency.
- 💡 Most of the world's money exists as digital data, not physical banknotes or coins.
- 💡 Salt was once so valuable it was used as money, leading to the word 'salary'.
Frequently Asked Questions
How many topics are covered in this chapter?
This chapter covers 8 key topics: Introduction and Purpose of Cash Flow Statement, Cash and Cash Equivalents, Classification of Activities, Cash Flow from Operating Activities, Cash Flow from Investing Activities, and more. The BrainWeave AI tutor explains each one with examples.
Is Chapter 6: Cash Flow Statement important for board exams?
Yes — Class 12 is a CBSE board exam year, and every NCERT chapter is part of the syllabus. Use BrainWeave's AI tutor to master this chapter, then practice with the auto-generated quizzes and mind maps.
Can I get NCERT solutions for this chapter in Hindi?
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