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Are Cash Flow Statements mandatory?

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Are Cash Flow Statements mandatory?. Find Complete details for Applicability for Cash Flow statement. This article is relevant for CA Final and CA IPCC Students. We did not have a definition of financial statement until the coming of Companies Act 2013 which gave the definition of financial statement under sec 2 (40). There are many queries related to Cash Flow Statement like – cash flow statement mandatory for which companies in India, can cash flow statement mandatory etc. Now you can scroll down below and check complete details regarding “Are Cash Flow Statements mandatory?”

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Are Cash Flow Statements mandatory?

Are Cash Flow Statements mandatory CAknowledge

We did not have a definition of financial statement until the coming of Companies Act 2013 which gave the definition of financial statement under sec 2 (40). It says Financial Statement in relation to a company includes:

  1. Balance Sheet
  2. Profit and loss A/c / Income and Expenditure a/c for non-profit organization
  3. Cash Flow statement
  4. Statement of changes in equity ( if applicable )
  5. Explanatory Notes forming a part of any document referred above.

Financial Statement w.r.t. One Person Company, Dormant Company and Small Company may not include Cash Flow Statement.

Preparation of Cash Flows statements for all companies (except one person Company, Small Co and Dormant Co.) are mandatory as per Companies Act 2013.  Earlier only listed companies covered under listing agreement of clause no 32 we required to prepare Cash Flow Statements.

One Person Company

A company which has only one person as member.

Dormant Company

A company that is formed to hold an asset or intellectual property (patent, copyright e.tc.)or a company which is formed for a future project and has no significant accounting transaction such a company is called Dormant Company or Inactive Company.

A company which has not carried out any business operation or has not made any significant transaction during last two financial years or has not filled Financial Statements during last two financial years , such company is also included in the definition of inactive company.

Accounting transaction shall not include:

  • Fees to the registrar
  • Payment made to fulfill the requirement of any Act or any other law
  • Allotment of shares
  • Office maintenance expenses

The reason for not including these is that they don’t constitute significant transaction. Mere paying the fees of the registrar or issuing shares or incurring office maintenance expenses, one company cannot be said to active.

Small Company

  • Not a public Company
  • Paid up capital does not exceed 50 lac or any such amount as may be prescribed but such shall not exceed 5 crore
  • Turnover does not exceed 2 crore or any such amount as may be prescribed but such shall not exceed 20 crore
Thus all companies, whether Public or Private are mandatorily required to prepare Cash Flow statements except One person company, Dormant Company and Small Company.

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About Anirudh Sonpal

2 comments

  1. Kindly clarify whether all the three conditions prescribed by the definition of small company is required to be complied with before qualifying as a small company?

    • Hi U.PRAKASH

      ‘‘small company’’ means a company, other than a public company,— (i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; or (ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees: Provided that nothing in this Section shall apply to— (A) a holding company or a subsidiary company; (B) a company registered under Section 8; or (C) a company or body corporate governed by any special act

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