Classification of Cash Flows by Standard Heading

Classification of Cash Flows by Standard Heading

• Operating activities

From operating activities are in general the cash effects of transactions. Other events relating to operating or trading activities.

Normally shown in the profit and loss account in arriving at operating profit. They include cash flows in respect of operating items relating to provisions, whether or not the provision was included in operating profit.

A reconciliation between the operating profit reported in the profit and loss account. The net flow from operating activities should be given either adjoining the cash flow statements or as a note. The reconciliation is not part of the cash flow statement:

If adjoining the cash flow statement, it should be clearly labeled and kept separate. The reconciliation should disclose separate the movement in stocks, debtors. Creditors related to operating activities and other differences between cash flows and profits.

Returns on investments and servicing of finance

These are receipts resulting from the ownership of investment and payments to providers of finance and not equity shareholders.

• Cash inflows from returns on investments and servicing of finance include

1. Interest received, including any related tax recovered

2. Dividend received, net of any tax credits

• Cash outflows from returns on investments and servicing finance include

1. Interest paid (even capitalized), including any tax deducted and paid to the relevant tax authority.

2. Those are treated as finance costs (this will include issue costs on debt and not equity share capital).

3. The interest element of finance lease rental payments.

4. Dividends paid on not equity shares of the entity.

Capital expenditure and financial investment

These cash flows are those related to the acquisition or disposal of any fixed asset other than one required to be classified under “acquisitions and disposals” and any current asset investment not included in liquid resources.

If no cash flows relating to financial investment fall to be included under this heading the caption may be reduced to “capital expenditure”.

The cash inflows here include:

• Receipts from sales or disposals of property, plant, or equipment.

• Receipts from the repayment of the reporting entities’ loans to other entities.

Cash outflows in this category include:

• Payments to acquire property, plant, or equipment

• Loans made by the reporting entity


These are cash flows to or from taxation authorities in respect of the reporting entities’ revenue and capital profits. Value-added tax and other sales taxes are disclosed below.

• Taxation cash inflows include cash receipts from the relevant tax authority of tax rebates, claims or returns, or overpayments.

• Taxation cash outflows include cash payments to the relevant tax authority of tax, including payments of advance corporation tax.

Acquisitions and disposals

These cash flows are related to the acquisition or disposal of any trade or business, or of an investment in an entity that is an associate, a joint venture, or a subsidiary undertaking.

• Cash inflows here include receipts from sales of trades or business.

• Cash outflows here include payments to acquire trades or business.

Equity dividends paid

The cash outflows are dividends paid on the reporting entity’s equity shares, excluding any advance corporation tax.


That wasn’t very cash money of you

That wasn’tvery cash money of you

Cash flow statement

Free cash flow

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Your financial transactions


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