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Answer:
The Institute of Chartered Accountants of India has issued an accounting standard 3, “Cash Flow Statement”. It clearly spells out all the requirements in relation to cash flow statement. According to Accounting Standard 3,”Cash Flow Statement” there is two methods: (a) Direct Method and (b) Indirect Method
1. Direct and Indirect method of cash flow
Appendix: The appendix is illustrative only and does not form part of the accounting standard. The purpose of this appendix is to illustrate the application of the accounting standard.
- The example shows only current period amounts.
- Information from the statement of profit and loss and balance sheet is provided to show how the statements of cash flows under the direct method and the indirect method have been derived. Neither the statement of profit and loss nor the balance sheet is presented in conformity with the disclosure and presentation requirements of applicable laws and accounting standards. The working notes given towards the end of this appendix are intended to assist in understanding the manner in which the various figures appearing in the cash flow statement have been derived. These working notes do not form part of the cash flow statement and, accordingly, need not be published.
