Cash Flow Statement
A cash flow statement explains how the cash balance changed during a period. Unlike the P&L, which follows the accrual principle, it tracks actual cash movements and classifies them into three activities as prescribed by AS-3 / Ind AS 7:
- Operating activities: cash from customers, payments to suppliers and employees, rent, taxes — the core business.
- Investing activities: purchase or sale of fixed assets and investments, interest and dividends received.
- Financing activities: loans raised or repaid, capital introduced, interest paid, drawings or dividends.
Formula
Net change in cash = Net cash from operating (A) + investing (B) + financing (C). Closing cash = Opening cash + Net change. This closing figure must match the cash and bank balances in the balance sheet.
How this tool works
Enter the opening cash and cash equivalents, then list each inflow or outflow under the three activity tables. The statement, a bar chart of the three activities, and the reconciliation to closing cash update instantly. Download as PDF or Excel. This is the direct method presentation, which is easier for small businesses; the indirect method starts with net profit and adjusts non-cash items.
Worked example
Opening cash ₹1,15,000. Operating: received from customers ₹23,50,000; paid to suppliers ₹14,80,000; salaries ₹3,60,000; other expenses ₹1,50,000; tax ₹62,000 → A = ₹2,98,000. Investing: machinery purchased ₹2,50,000; vehicle sold ₹45,000; interest received ₹12,000 → B = −₹1,93,000. Financing: loan received ₹2,00,000; repaid ₹90,000; interest ₹22,000; drawings ₹1,20,000 → C = −₹32,000. Net change ₹73,000; closing cash ₹1,88,000.
Entering items
Mark each line as inflow or outflow; the tool applies the sign and shows outflows in negative figures, as in published statements. Non-cash items such as depreciation, provisions and credit sales are never entered under the direct method.
Why it matters
A business can be profitable yet run out of cash if receivables pile up or heavy capital expenditure is funded from working capital. Positive operating cash flow is the healthiest sign; negative investing flow usually reflects growth; financing flows show how that growth is funded.
Frequently Asked Questions
Is interest paid an operating or financing activity?
For non-financial businesses AS-3 treats interest paid as a financing activity and interest/dividend received as investing. Banks and NBFCs classify them as operating.
What are cash equivalents?
Short-term highly liquid investments readily convertible to cash, such as deposits with original maturity of three months or less.
Direct vs indirect method — which should I use?
Both give the same net operating cash flow. The direct method lists gross receipts and payments; the indirect method adjusts net profit for depreciation and working-capital changes.
Is a cash flow statement mandatory?
Companies (except small/one-person companies) must include it in financial statements; proprietors and firms prepare it voluntarily or for bank loan proposals.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.