Page 92 - Ebook Financial Accounting 3

Net cash flow from operating activities is to be derived at as follows:

Statement of Cash Flow for the year ended………….

RM RM
Cash Flow from Operating Activities

Cash Inflow
Cash receipt from customers (Sales and debtors) xx

Cash receipt from other operating incomes xx

Cash Outflow

Cash paid to suppliers and employees (xx)

Cash paid for other operating incomes (xx)
Cash generated from operations xxx

Income tax paid (xx)
Interest paid (xx) xxx

Nett cash flow from operating activities xxx

Indirect method of ascertaining cash flow from operating activities

There may be even decrease in cash balance while the entity has made profit and vice versa
due to the following reasons:

i. Profit/loss is calculated based on accrual basis, not cash basis
ii. Its calculation takes into account of not only cash expenses but also non-cash

expenses such as depreciation

iii. Operating activities may lead to changes in working capital (current assets and
current liabilities)

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