Classification of Activities for the Preparation of Cash Flow Statement

The cash flow statement is partitioned into three segments, namely: cash flow resulting from operating activities, cash flow resulting from
investing activities, and cash flow resulting from financing activities.The money coming into the business is called cash inflow, and money
going out from the business is called cash outflow.

· Operating activities

Operating activities include the production, sales and delivery of the Enterprise’s product as well as collecting payment from its customers.
This could include purchasing raw materials, building inventory, advertising, and shipping the product. Operating cash flows include:

l Receipts from the sale of goods or services

l Receipts for the sale of loans, debt or equity instruments in a trading portfolio

l Interest received on loans

l Dividends received on equity securities

l Payments to suppliers for goods and services

l Payments to employees or on behalf of employees

l Interest payments

Items which are added back to [or subtracted from, as appropriate] the net income figure (which is found on the Income Statement) to arrive
at cash flows from operations generally include:

l Depreciation (loss of tangible asset value over time)

l Deferred tax

l Amortization (loss of intangible asset value over time)

l Any gains or losses associated with the sale of a non-current asset, because associated cash flows do not belong in the operating section.
(unrealized gains or losses are also added back from the income statement)

· Investing Activities

An enterprise's investment practices include the acquisition of fixed assets (such as plants and equipment, land and buildings, furniture and
fixtures) with a view to producing potential revenues. Owing to being a significant operation, the cash flows from these operations are
reported separately. Examples of cash flows arising from investing activities are in AS-3 (revised) as follows:

(a) Cash payments of acquired fixed assets including the intangibles. These payments include those relating to capitalized research and
development costs and self-constructed fixed assets;

(b) Cash receipts from disposal of fixed assets including the intangibles

(c) Cash payments to acquire shares, warrants or the debt instruments of other enterprises and interests in joint ventures (other than the
payments for those instruments considered to be cash equivalents and those held for dealing or trading purposes);

(d) Cash receipts from the disposition of shares , bonds or debt instruments of other undertakings and joint venture interests (other than
receipts from such instruments deemed to be cash equivalents and retained for the purposes of trading or dealing);

(e) cash advances and loans that are made to third parties. This excludes the advances and loans made by a financial enterprise);
(f) cash receipts from the repayment of advances and loans made to third parties (other than advances and loans of a financial enterprise);

(g) cash payments for future contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing
or trading purposes, or the payments are classified as financing activities; and

(h) cash receipts from future contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing
or trading purposes, or the receipts are classifi ed as fi nancing activities.

· Financing Activities

All activities related to the size and composition of the capital (equity and preferences) and borrowing or loans are listed under fi ancial
activities. According to the AS-3 (revised), separate disclosure of cash flows resulting from funding activities is relevant as it is useful in
predicting potential cash flow statements by fund providers (both capital and borrowings) to the Business.

(a) Cash proceeds from issuing of shares or other similar instruments;

(b) Cash proceeds from issuing debentures, loans, notes, bonds and other short or long-term borrowings; and

(c) Cash repayments of the borrowed amounts.