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BRILLIANT’S Cash Flow Statement 111

separately from those cash flows that are g_w{MV _mÌm Omo Am°naoqQ>J úm_Vm _| d¥{Õ H$mo
required to maintain operating capacity. Xem©Vr h¡Ÿ&
The separate disclosure of cash flows that Am°naoqQ>J j_Vm H$mo ~‹T>mZo dmco H¡$e âbmo Ed§
represent increase in operating capacity and Am°naoqQ>J j_Vm H$mo ~Zm`o aIZo dmco H¡$e âbmo H$mo
cash flows that are required to maintain AcJ-AcJ àH$Q> H$aZo go Cn`moJH$Vm© H$mo `h
operating capacity is useful in enabling the user {ZYm©[aV H$aZo _| ghm`Vm {_cVr h¡ {H$ B§Q>aàmBg AnZr
to determine whether the enterprise is
investing adequately in the maintenance of its Am°naoqQ>J j_Vm H$mo ~Zm`o aIZo hoVw n`m©ßV {d{Z`moJ
H$a ahr h¡ AWdm ZhtŸ& dh B§Q>aàmBg Omo CgH$s
operating capacity. An enterprise that does not
invest adequately in the maintenance of its Am°naoqQ>J úm_Vm H$mo ~ZmE aIZo Ho$ {cE n`m©á {d{Z`moJ
operating capacity, may prejudice future Zht H$a ahr hmo, g§^d h¡ {H$ dh dV©_mZ VacVm Ed§
profitability for the sake of current liquidity ñdm{_`m| H$mo ^wJVmZ Ho$ {cE ^{dî` Ho$ cm^ H$m nydm©Zw_mZ
and distribution to owners. cJm ahr hmoŸ&
Conversion of Accrual basis Income EH«y$Ab ~o{gg BÝH$‘ ñQ>oQ>‘|Q> H$m H¡$e ~o{gg
Statement to Cash basis Income BÝH$‘ ñQ>oQ>‘|Q> ‘| n[adV©Z
Statement NPP

Accrual Basis Income Statement Adjustments Cash Basis Income Statement

+ Opening Balance of Amount Cash received
Sales Revenue Earned _ Receivable Equals from customers
Closing Balance of Amount (sales on cash basis)
Receivable
Less
Less
Cost of Goods Sold + Closing Balance of Merchandise
Inventory Cash paid for
_ Opening Balance of Merchandise Equals Merchandise
Less Inventory Inventory
+ Opening Balance of Amount Payable
_
Closing Balance of Amount Payable
Less
Expenses (other than
depreciation and + Closing Balance of Prepaid Expenses
_
amortization) Opening Balance of Prepaid Expenses Equals Cash paid for
+ Opening Balance of Accrued Expenses expenses
_
Less Closing Balance of Accrued Expenses
Depreciation Equals
and Amortization Eliminate Depreciation and Amortization
Equals
Net Income
Net Income (accrual basis) (cash basis) 

MANAGERIAL USES OF CASH FLOW STATEMENT
H¡$e âbmo ñQ>oQ>_|Q> Ho$ _¡ZoO[a`b Cn`moJ
Q.13. What are the main managerial uses of cash flow statement?
H¡$e âbmo ñQ>oQ>_|Q> Ho$ _w»` _¡ZoO[a`b Cn`moJ Š`m h¢?