Why need to adjust Non Cash Items in Cash Flow Statement

sir da reason is cash flow is meant to show cash flow during a particular period..if we deduct now cash item like provision,depreciation and other outstanding expenses there no cash outflow and we add back dese items to make it cash profit and dn we adjust non-operating items to make it operating cash profit

Dear Nayan,

First of all Rs. 100 cannot be said as"cash operating profits" because "cash operating profits" are 105, therefore if Rs. 5 is not adjusted then the statement is incorrect

Secondly, take an example of Depreciation, now it's effect doesn't get reversed, so u cannot say that lets adjust only those non cash items whose impact doesn't gets eliminated...

Reason why u can't say this thing is the consistency - any statement has to be drawn with consistency in treating the thing, if not with other statements then atleast within the statement..

Brother, CFS is a part of financial statements, objective is better understanding............  

Nayan,

wat u tried to explain is to arrive at the net cash flow which is the same in both the cases u explained with the example. But ur qstn was about operating profit which varies from both the case in ur example also. So wat u hv to look into is the purpose for which CFS is made and drawn up. ANd later, operating profit is for the disclosure comfort. THaT the users of FS will be aware of the percentage of Cash operating profit in the Total net profit. A standard wont be made without a purpose dude...

hey nayan Joshi u just need answer...................just think about P & L A/c .....................there are some operating expenses, some Non-operating Activities as well as non cash expenses..........u r taking provision as a liability so funny provision are not actual liabilities.................they are created for loss...............

i m tutor of accountancy teach upto graducation................didn't hv done any professional course...............in my point of view 90% teachers/tutors are crammers as they teach wht they hv learnt and 99% students are crammers to...........................my below statements wuld prove that.

a). techers/tutors treat provision for doubtful debts as current liability in CFS

b). short term borrowings as current liability. 

c). some time back i asked to a teacher " when interest received is treated as financing activities in CFS" he replied never............

d). In partnership: a debtor whose account has been written off now promised to pay ` 4,000. 

i got stupidest reply from the teachers as well as from tutors.......................crammer shuld be hanged till death.

Accounting just need two things

 Good english... understanding  + Basic accounting fundassss