as 3, Accounting Standard 3: Cash Flow Statement : The Standard deals with the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of a Cash Flow Statement which classifies cash flows during the period from operating, investing
and financing activities.
- For Companies - As per the Companies Act, 2013, Cash Flow Statement is required to be prepared by every company except a one person, small and dormant company.
- For non-companies - AS 3 is not mandatory for entities falling in Level II and Level III.
Accounting Standard - 3, Cash Flow Statement (AS 3)The main reason for the preparation of the Cash Flow Statement is that the Income Statement of an enterprise is always prepared on an Accrual Basis and it may show profits in the Income Statement but the Cash received out of these profits may be low to run the business or vice-versa.
Classification of Cash Flows as per Accounting Standard 3
- Cash Flow from Operating Activities (Direct Method/ Indirect Method)
- Cash Flow from Investing Activities
- Cash Flow from Financing Activities