Cash Flow Statement

CASH FLOW STATEMENT

  • This is also known as cash flow summary or cash flow budget or flow of funds statement.
  • Cash flow statement is a summary of cash inflows and cash outflows of a business organization in a particular period, say a season or a year.
  • It is usually prepared for the future, hence the name cash flow budget.
  • The merit of this particular statement is that, it helps to assess the time at which the funds are required for farming and other allied enterprises, sources from which these can be raised, the purpose for which the loan is required, the need of sale and purchase of capital assets, the time and quantum of repayment, etc.
  • Cash flow statement is prepared at the beginning of the agricultural year and checked every quarterly.
  • For convenience, quarterly checks are made
  • Cash Receipts
    • Cash Balance
    • Total Operating Sales
    • Total Capital Sales
    • Non-farm income
    • Borrowings
    • Total
  • Cash Expenses
    • Operating Expenses
    • Capital Investment
    • Family Living Expenses
    • Payment of Previous year’s Debts
    • Payment of ST Loans and Installments on Investment Loans
    • Total
  • Cash Balance is the difference between Cash Receipts and Cash Expenses

Advantages of Cash Flow Budget

  • It is a summary of all the financial matters of the farmer in a comprehensive report.
  • This helps
    • to estimate the total credit needs (Short term, Medium term and Long term) of the farmer along with time and quantum;
    • to plan the repayment schedule,
    • in making purchases and sales at the appropriate time thereby helping to minimize the credit dependence, so that the farmers can keep limits to avoid wastages
    • to keep ready input requirements well in advance so that the last minute rush can be avoided
    • to know the farm household’s expenditure pattern and enable the farmer to exercise a check on farm costs,
    • the farmer in preparing the farm business plans for the ensuing years,
    • the banker for revising the scale of finance, rescheduling loans, etc., and
    • finally, as a tool of financial control to the farmer.
Last modified: Tuesday, 24 April 2012, 10:39 AM