Reconciliation of Cash Flow with Profit & Loss A/c

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This query is : Resolved

CA Shilpa Dekhane (Querist)

05 November 2007 Can anybody tell me:??
Can we reconcile Cash Flow with P&L or vise versa.

Because in Cash Flow we consider only actual inflow/outflow of the cash/bank, while in case of P&L, we show our expenses on accrual basis. So how can we reconcile cash flow with P&L??

KAAPIL

KAAPIL (Expert)

05 November 2007 What is the purpose? You can find cash profit by doing so and coross check it. This process is done only for the academic interest.

CA Shilpa Dekhane

CA Shilpa Dekhane (Querist)

05 November 2007 Dear Kapil:

My senior has asked me o reconcile Cash Flow with P&l, because in Cash low it it showing surplus while in P&L, it is showing -ve profit.

KAAPIL

KAAPIL (Expert)

05 November 2007 Dear Shilpa,
I am posting the details for your perusal.

KAAPIL

KAAPIL (Expert)

05 November 2007 Dear Shilpa,

You must have computed profit made during the year i.e. increase in P&L account balance and
Add back
Provision for taxation
Proposed Dividend
Transfer to Reserves

You will arrive at Net Profit before taxation taken to cash flow

This will apply cash flow in operating activities in Indirect Method.

The basic proble is that you are having Cash Flow Surplus and P&L negative.
It can be so that Operating Activities is negative and surplus is due to Financing and Investing Activities or interchange of any items.

I took too long to explain but as a Professor I take time.

I hope you will get the answer.
Happy Diwali.

CA Shilpa Dekhane

CA Shilpa Dekhane (Querist)