The Cash Flow Statement is based upon the cash basis of accounting.

The cash flow statement consists of two terms cash and flow. Cash means cash and cash equivalents.

• It is prepared on the cash basis of accounting.
• It ignores the accrual concept of accounting.
• The cash-flow statement is also known as the Statement of changes in financial position on a cash basis and a Statement of accounting for the variation of cash.
• It provides information about inflows (source) and outflows (application) of the Cash and cash equivalents.
• It reveals the inflow and outflow of cash.
• It helps to know the liquidity position of an organization but it is incapable of revealing the overall financial position of a firm.
• It is prepared as per Accounting Standard -3 (Revised).
• It has been made mandatory for All Companies (Public and Private), except One Person companies, Small companies, and Dormant companies.