CASH FLOW STATEMENT

CASH FLOW STATEMENT
                                                 In finicial accounting cash flow statement also known as statement of cash flow or fund flow statement.This statement shows how much cash come in business or out flow from the business.

                                         METHODS
                                 there are two mathods of recording cash flow

1. DIRECT METHOD
2.IN DIRECT METHOD

We commonly use indirect method the explanation of this is given below

                                           INDIRECT METHOD
In indirect method there are three activities that are given below

1. Operating activity
2.Investing activity
3.Financing activity

                                              Operating activity
Following are including in the operatin activity

.Accout reciveable
.Account payable
.Inventory
.Prepaid expense
.Outstanding expense

                                         Investing activity
Following are including in investing activing
Maketable securities
.Purchase of asset

                                        Financing activity
Following are included in financing activity

.Owner invest in business
.Shares issu
.Loan recived


.
.Unearned revenue

Property,Plant and equipment and tangible assets

Definition of PPE items :
                                                    IAS 16 defines PPE as tangible items that are

1. Use for production or supply of goods purpose,for rental to others.
2.Its expected life must be more than one years.

Measurement of PPE:
                                   for the measurement of PPE value following costs are included.

1.The cost of purchase,less any trade discount,add import duties and non refundable sales tax.
2.All costs that are incurred to bring the asset to the location and condition necessary for capable of use.
3.payments made to labor to install the asset.
4.Site preparation costs.
5.Fees paid to professional to install the asset.
6.Any other cost that is directly associated with asset.

           Any abnormal loss that occur due to late start of working by company cannot be included.

Depreciation of Asset:
                                    depreciation explain the benefit that is get from the asset.

REVALUATION AND DERECCONGNITION


REVALUTION
                          It means that revalue the value of asset. valu of asset may increase or decrease after the revaluation.

REVALUATION GAINS
                                         If loss on asset after revaluation already to income statement than gain on asset also transfer to income statement.
REVALUTION LOSS
                                     Ifthere is loss after revaluation and gain also transfer to equity than loss is also transfer to equity.

Bank reconciliation

                             BANK RECONCILIATION
Definition
                Bank reconciliation is process that explains the difference between balance shown in the the bank statement and balance shown in the cash book of the business or orgnization.
   
  Differences in bank statement and cash book may occur due to following reasons.

                                                  BANK STATEMENT
1.Add Deposit in transit
2.Less cheques issued but not yet presented in bank
3.Add or less bank errors that may occur due to writing the amounts.

                                                  CASH BOOK
1.Less services charges debiteb by bank
2Less.NSF cheques and fees
3.Less printing charges
4.Add Intrest cratided by bank
5.Add note reciveable directly deposit in bank acount
6.Add or less Errors that may occur during writig the amount in cash book.

INVENTRIES

Inventory
                 Inventries are the products that are purchase or produce for sale purpose.It also include the raw matrial that is purchase for production purpose.
Scope of inventry
                            IAS2 apply only on the products that are purchase for sale purpose and raw matrial for production purpose.
               sometime other section of IAS2 are apply i.e IAS11,IAS39,IAS41 etc.
Cost of inventories
                                All costs that are paid to take the goods into the godown i.e rent , labour, tax etc.Losses are not include into the inventory cost i.e abnormal loss, loss of inventory,forgien exchange difference etc.
Inventory system
                            There are two inventory systems that are used to record inventories.
1.priodic inventory system
2.perpatual inventory system
1.Periodic inventory system
                                               In periodic system when we purchase goods than debited the purchase account.
2.perpatual inventory system
                                               in perpatual system we debiteb the inventory account.
                                     Mathods to record inventories
 There are three mathods to record inventories
1.FIFO MATHOD
2.LIFO MATHOD
3.AVERAGE MATHOD

Closing entries

Closing entries
                         At the end of the accounting period we make the adjusting entries and than we make the adjusting trial balance.Than we close the accounts after adjusting trial balance at the end of the accounting period.we close the all revenue and all expense account in a temperary account name as income summary account.we also close dividend account in retain earning account.And at the end we close the income summary account into retain earning account.we can explain these closing entries with the help of simple entries.

1.Closing entry of revenue.
                                            We know that revenue has always credit balance so we close the revenue account by making the revenue account debit and income summary account credit.

                        Revenue account
                                                 Income summary account

2.Closing entry of expense.
                                           We know that all the expenses that are made by a business during the accounting period have debit balance so we close the expense account by making them credit and income summary account as debit.

                             Income summary account
                                                                expense account

3.closing entry of income summary.
                                                        We close the income summary account into the retain earning.If the income summary has debit balance than it is make credit and close into retain earning and it has credit balance than it make debit and close into retain earning.

                             Retain earning
                                                 income summary account

                              income summary account
                                                           Retain earning

4.Closing dividend account.
                                           we know that dividend is not our expense and it is also not revenue it is countra entry and it has debit balance so we close this by making this credit and close into retain earning.
                         
                                  Retain earning
                                                        Dividend account

Accounting cycle

Accounting cycle cosist on the following steps.

1.collecting data
2.making journal
3.posting entries in ledgers
4.unadjusted trial balance
5.making adjustig entres
6.Adjusted trial balance
7.Finicial statements
8.Closing books


1.Collection of data:
                                First of all we collect the data from the transactions we make in our daily business
2.Making journal:
                                          after collecting data we make the journal entries and write that what is debit and what is credit.
3.Making ledger
                                      when we make the journal entries than we post these entries into the ledger accounts
4.Unadjusted trial balance:
                                                               after prepration of ledger accounts we make the unadjusted trialbalance.
5.Adjusted entries:
                                Than we make the adjusted entries that are make in the preceeding time
6.Adjusted trial balance:
                                        After making the adjusted entries we make the adjusted trial balaance.
7.Finicial statements:
                                   After making the adjusting entries we make the finicial statements in which income statement,statement of retain earning and balance sheet are included.
8.Closing books:
                                        after preparing the finicial statements we make the closing entries and than close the books.

Accounting cycle

Accounting cycl consist on following process.

1.In first step we collect data and analyze the collected data.
2.After analyzing data we put transactions into genral journal.
3.than we put the entries into ledger accounts.
4.Than we make the unadjusted trial balance.
5.Than we make adjusted entries.
6.After this we make the adjusted trial balance.
7.Than we orgnize the accounts into the finicial statement.
8.Than we close the books.