Question -
Answer -
Following steps are followed:
1. Determine cash flows obtained from operating activities
2. Determine cash flows obtained from financing activities
3. Determine cash flow obtained from investing activities
4. Determine net increase or decrease which is obtained by adding amounts from all the cash flow activities.
5. Add the opening balance of cash and the cash equivalents and deduct the same from the amount determined in the previous step.
There are two methods which are used for preparation of cash flow statement
1. Direct Method
2. Indirect Method.