CHAPTER-9 Cash Flow Statement EXAM HANDBOOK Accountancy XII (2021 Edition) 187

Chapter 9
Cash Flow
Statement

Revised CBSE Syllabus for 2021 Examination Learning Outcomes

Meaning, objectives and preparation (as per AS 3 (Revised) After going through this Unit, the students will be able to:
(Indirect Method only): Adjustments relating to depreciation
 state the meaning and objectives of cash flow statement.
and amortization, profit or loss on sale of assets including
investments, dividend (both final and interim) and tax.  develop the understanding of preparation of Cash Flow

Note: Bank overdraft and cash credit to be treated as short term Statement using indirect method as per AS 3 with given
borrowings. Current Investments to be taken as Marketable adjustments.
securities unless otherwise specified.

PROPOSED DIVIDEND – New Accounting Treatment (as per CBSE Guidelines and NCERT book 2020-21)
CBSE Guidelines: Previous years’ Proposed Dividend to be given effect, as prescribed in AS-4, Events occurring after the Balance
Sheet date. Current years’ Proposed Dividend will be accounted for in the next year after it is declared by the shareholders.
NCERT Guidelines: As per AS-4, Contingencies and Events Occurring after the Balance Sheet Date, Proposed dividend is shown
in the Notes to Accounts. It will be shown as contingent liability since it becomes a liability after it is declared (approved) by
the shareholders. It will be accounted in the books of account after it is declared (approved) by the shareholders in the Annual
General Meeting. Since, previous year’s Proposed Dividend will be declared (approved) in the current year; previous year’s Proposed
Dividend will be accounted as dividend payable. Also, declared dividend is paid within 30 days of its declaration therefore; it will
be paid within the same financial year.
Briefly, proposed dividend of previous year after declaration (approved) by the shareholders will be debited to surplus i.e., Balance
in Statement of Profit and Loss. While preparing cash flow statement, previous year’s proposed dividend will be added to Act
Profit under operating activities and will be shown under financial activity.

Theoretical Concepts & Accounting Treatment As per Revised Syllabus for 2021 Examination
 Cash Flow Statement is a financial statement which shows inflows and outflows of cash and cash equivalents from various
activities (operating activities, investing activities and financing activities) of an enterprise during an accounting year.
 Cash and Cash Equivalents: As per AS-3, ‘Cash’ comprises cash in hand and cash at bank (demand deposits with banks). ‘Cash
equivalents’ means short-term highly liquid investments which are easily convertible into cash having insignificant risk of changes in
value. An investment will be treated as cash equivalents only when it has a short maturity of 3 months/90 days or less.
 Cash Flows: ‘Cash Flows’ (cash inflows and cash outflows) means movement of cash and cash equivalents (in and out) due to
non-cash items. Proceeds from sale of machinery, cash received from trade receivables, dividend received, etc. are cash inflows.
Purchase of machinery for cash, payment to trade payables, interest payments, etc. are cash outflows.
 Objectives of Cash Flow Statement: • (Primary objective) To provide information about cash inflows and outflows of an
enterprise during an accounting year under various heads – operating activities, investing activities and financing activities. • To
assess the ability of the enterprise to generate cash and cash equivalents.
 188 EXAM HANDBOOK Accountancy XII (2021 Edition) For CBSE Exam 2021 – by Subhash Dey

 Classification of Activities for Preparation of Cash Flow Statement

1. Cash flows from Operating Activities: Operating activities are main revenue generating activities.
Cash Inflows: (i) Cash receipts from sale of goods and services (ii) Cash receipts from royalties, fees, commissions etc.
Cash Outflows: (i) Cash payments to suppliers of goods (ii) Cash payments of office and administrative expenses (iii) Cash
payments income taxes.
2. Cash Flows from Investing Activities: Investing activities relate to purchase and sale of fixed assets and long-term investments.
Cash Outflows: (i) Cash payments to purchase fixed assets (both tangible and intangible) (ii) Cash payments to purchase shares/
debentures of other companies (iii) Loans and Advances made to third parties (short-term or long-term both).
Cash Inflows: (i) Cash receipts from sale of fixed assets (ii) Interest received (iii) Dividend received
3. Cash Flows from Financing Activities: Financing activities relate to long-term funds or capital of an enterprise.
Cash Inflows: (i) Cash proceeds from issuing shares (ii) Cash proceeds from issuing debentures, bank overdraft, loans/borrowings
(short-term or long-term both).
Cash Outflows: (i) Redemption of debentures or preference shares, buy back of equity shares, repayment of long-term loans, etc.
(ii) Interest paid on debentures, long-term loans and public deposits (iii) Dividends paid (final dividend and interim dividend)
 Key Points
• Extraordinary items are non-recurring in nature, e.g. Loss due to theft/earthquake flood (ii) Insurance proceeds from famine
settlement/earthquake disaster settlement.
• Interest and Dividend: In case of a non-financial enterprise: (i) Payment of interest and dividends are classified as cash outflows
from financing activities. (ii) Receipt of interest and dividends are classified cash inflows from investing activities.
In case of a financial enterprise (whose main business is lending and borrowing): (i) Interest paid, interest received and dividend
received are classified as operating activities. (ii) Dividend paid is a cash outflow from financing activities.
•
Types of Taxes Classification of Activities
Income tax (i.e. tax on normal profit/operating profit) Cash outflow from operating activities
Capital gains tax (i.e. tax on capital profits) Cash outflow from investing activities
Dividend tax (i.e. tax on amount distributed as dividend) Cash outflow from financing activities
• Investing and financing transactions that do not involve use of cash and cash equivalents are non-cash transactions e.g. Issue of
shares/debentures to the vendors for purchase of fixed assets, Issue of fully paid bonus shares, etc.
• Cash flows arising from purchase and sale of dealing/trading securities are classified as operating activities as they represent ‘Inventory’
specifically held for resale.  (6)
• Cash advances and loans made by financial enterprises are operating activities since these are their main activity.
• Instalment paid for machinery purchased on deferred payment basis includes both interest and loan, the interest element is cash
outflow from financing activities and the loan element is cash outflow from investing activities.
• Purchase of shares is an operating activity for a share brokerage firm (an investment company).
• Activities which investing activities for every type of enterprise: Purchase of Fixed assets, Sale of fixed assets
• Activities which are financing activities for every type of enterprise: Dividends paid, Issue of Shares/Debentures, Long-term Loans
State, giving reasons, whether the following transactions will result in inflow or outflow or no flow of Cash or Cash equivalents:
S. No. Transaction Effect on Cash and Cash Equivalents Reason
1. Sale of fixed asset (Book Value Cash inflow `95,000 There is movement of cash in from a non-
`100,000) at a loss of `5,000 cash item, i.e., fixed asset.
2. Purchase of Stock-in-trade Cash outflow There is movement of cash out from a non-
for Cash cash item, i.e., stock-in-trade.
3. Cash received from debtors Cash inflow There is movement of cash in from a non-cash
item, i.e., debtors.
4. Cash deposited in Bank/ No effect on Cash and Cash Equivalents It simply represents the movement between
Short term deposits in Banks items of cash and cash equivalents.
5. Cash withdrawn from Bank No effect on Cash and Cash Equivalents It simply represents the movement between
items of cash and cash equivalents.
6. Sale of marketable securities No effect on Cash and Cash Equivalents It simply represents the movement between
for cash at par items of cash and cash equivalents.
7. Proposed Dividend No effect on Cash and Cash Equivalents Dividend is not yet paid since it is not yet declared/
approved by the shareholders. Hence, there
is no outflow of cash and cash equivalents.
 CHAPTER-9 Cash Flow Statement EXAM HANDBOOK Accountancy XII (2021 Edition) 189

8. Dividend/Interest Paid Cash outflow There is movement of cash out from a non-cash item.
9. Interest received on debentures Cash inflow There is movement of cash in from a non-
held as investment cash item, i.e., investments.
10. Discount received on making No effect on cash and cash equivalents There is no inflow or outflow of cash on
payment to suppliers discount received.
11. Old furniture written off No effect on cash and cash equivalents There is no inflow or outflow of cash when
an old furniture is written off.
12. Purchase of fixed assets on No effect on cash and cash equivalents There is no immediate outflow of cash.
long term deferred payment
13. Charging of depreciation on No effect on cash and cash equivalents Depreciation is a non-cash expense. There is no
furniture inflow or outflow of cash when depreciation
is charged on furniture.
14. Payment of cash to creditors Cash outflow There is movement of cash out from a non-cash
item, i.e., creditors.
15. Goodwill written off No effect on cash and cash equivalents There is no inflow or outflow of cash and cash
equivalents.
16. Refund of Tax Cash inflow There is movement of cash in from non-cash item.
17. Provision for Tax No effect on cash and cash equivalents There is no outflow of cash yet. Only provision
for tax has been made from Statement of Profit
and Loss.
Classify the following transactions into cash flows from operating activities, investing activities and financing activities:
S. No. Transaction Cash flow Activities
1. Purchase of machinery for cash Cash outflow Investing activities
2. Proceeds from issuance of equity share capital Cash inflow Financing activities
3. Cash revenue from operations Cash inflow Operating activities
4. Proceeds from long-term borrowings Cash inflow Financing activities
5. Proceeds from sale of old machinery Cash inflow Investing activities
6. Cash receipt from trade receivables Cash inflow Operating activities
7. Trading commission received Cash inflow Operating activities
8. Purchase of non-current investment Cash outflow Investing activities
9. Redemption of preference shares for cash Cash outflow Financing activities
10. Cash purchases Cash outflow Operating activities
11. Proceeds from sale of non-current investment Cash inflow Investing activities
12. Purchase of goodwill Cash outflow Investing activities
13. Cash paid to suppliers for goods purchased Cash outflow Operating activities
14. Interim dividend paid on equity shares Cash outflow Financing activities
15. Employee benefits expenses paid Cash outflow Operating activities
16. Proceeds from sale of patents Cash inflow Investing activities
17. Interest received on debentures held as investments by a non-financial enterprise Cash inflow Investing activities
18. Interest paid on long-term borrowings by a non-financial enterprise Cash outflow Financing activities
19. Office and administrative expenses paid Cash outflow Operating activities
20. Manufacturing overheads paid Cash outflow Operating activities
21. Dividend received on shares held as investment by a non-financial enterprise Cash inflow Investing activities
22. Rent received on property held as investment Cash inflow Investing activities
23. Selling and distribution expenses paid Cash outflow Operating activities
24. Income tax paid Cash outflow Operating activities
25. Dividend paid on preferences shares Cash outflow Financing activities
 190 EXAM HANDBOOK Accountancy XII (2021 Edition) For CBSE Exam 2021 – by Subhash Dey

26. Rent paid Cash outflow Operating activities

27. Bank overdraft and Cash credit Cash inflow Financing activities
28. Underwriting commission paid Cash outflow Financing activities
29. Brokerage paid on purchase of non-current investment Cash outflow Investing activities
30. Refund of income-tax received Cash inflow Operating activities
31. Purchase of property, plant or equipment for cash Cash outflow Investing activities
32. Sale of property, plant or equipment Cash inflow Investing activities
33. Procurement of loans Cash inflow Financing activities
34. Buy back of equity shares Cash outflow Financing activities
35. Tax paid on sale of land and building Cash outflow Investing activities
36. Dividend distribution tax paid Cash outflow Financing activities
37. Dividend paid by a finance company Cash outflow Financing activities
38. Dividend paid by a non-financial company Cash outflow Financing activities
39. Interest paid by a finance company Cash outflow Financing activities
40. Interest received by a finance company Cash inflow Operating activities
41. Dividend received by a Mutual Fund Company Cash inflow Operating activities
42. Purchase of shares by a share brokerage firm Cash outflow Operating activities
43. Securities premium reserve on issue of shares or debentures Cash inflow Financing activities
44. Redemption of debentures by payment in lump sum Cash outflow Financing activities
45. Loan element of the installment paid in respect of a machinery purchased Cash outflow Investing activities
on long-term deferred payment basis
46. Short-term loans and advances made to third parties by a financial enterprise Cash outflow Operating activities
47. Cash receipt from sale of debt instruments of other enterprises Cash inflow Investing activities
48. Interest received in cash from loans and advances made to third parties Cash inflow Investing activities
49. Cash receipt from the repayment of advances or loans made to third parties Cash inflow Investing activities
50. Purchase of securities for trading purpose Cash outflow Operating activities
51. Cash payments for insurance premiums Cash outflow Operating activities
52. Cash receipts from royalties, fees, commissions, etc. Cash inflow Operating activities
53. Cash proceeds from short-term borrowings Cash inflow Financing activities
54. Receipt of interest by a bank Cash inflow Operating activities
55. Acquired machinery for `2,50,000 paying 20% by cheque and Cash outflow Investing activities
executing a bond for the balance payable. `50,000
56. Paid `2,50,000 to acquire shares in Informa Tech. and received a Cash outflow Investing activities
dividend of `50,000 after acquisition. `2,00,000
57. Sold machinery of original cost `2,00,000 with an accumulated Cash inflow Investing activities
depreciation of `1,60,000 for `60,000. `60,000
 Preparation of Cash Flow Statement
CASH FLOW STATEMENT OF _____ (Company) for the year ending _____
Particulars Details (`) Amount (`)
I. CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit/Loss before Tax and Extraordinary Items xxx or (xxx)
Add: Non-cash and non-operating expenses for which deductions already made: • xxx
Depreciation • Goodwill/Patents written-off • Loss on sale of fixed assets/ non-
current assets • Interest paid on debentures/ long-term loans • Preliminary
expenses written off • Discount/loss on issue of debentures written off •
Provision made for doubtful debts • Premium on redemption of debentures
Less: Non-operating incomes for which additions already made • Interest income •
Dividend income • Profit on sale of fixed assets/non-current assets xxx
Operating Profit before working capital changes xxx or (xxx)
Add: • Decrease in current assets • Increase in current liabilities xxx
Less: • Increase in current assets • Decrease in current liabilities (xxx)
Note: Current assets will not include current investments, cash and cash equivalents and
short-term loans and advances. Current liabilities will not include short-term borrowings
and short-term provisions
 CHAPTER-9 Cash Flow Statement EXAM HANDBOOK Accountancy XII (2021 Edition) 191

Cash Generated from (or used in) Operating Activities before Tax and Extraordinary Items xxx or (xxx)
Less: Income Tax paid (Tax on normal profits/operating profits) (xxx)
Add: Income Tax Refund received xxx
Cash Generated from (or used in) Operating Activities after Tax but before xxx or (xxx)
Extraordinary Items xxx or (xxx)
+/– Effects of Extraordinary Items (+ Insurance proceeds from earthquake disaster
settlement – Loss due to theft/fire)
A. Net Cash from (or used in) Operating Activities xxx or (xxx)
II. CASH FLOWS FROM INVESTING ACTIVITIES
(i) Proceeds from Sale of Tangible Fixed Assets xxx
(ii) Proceeds from Sale of Non-Current Investments xxx
(iii) Interest received, Dividend received and Rent received xxx
(iv) Purchase of Fixed Tangible Assets (machinery and Intangible Assets (goodwill/ (xxx)
patents)
(v) Purchase of Non-Current Investments (xxx)
(vi) Capital Gain Tax paid (xxx)
B. Net Cash from (used in) Investing Activities xxx or (xxx)
III. CASH FLOWS FROM FINANCING ACTIVITIES
(1) Proceeds from issue of Share Capital (both equity and preference shares) xxx
(2) Proceeds from Long-term Borrowings (debentures, long-term loans, x% deposits) xxx
(3) Securities Premium Reserve (Premium on issue of shares/debentures) xxx
(4) Proceeds from Bank Overdraft raised xxx
(5) Redemption of Debentures/Preference Shares (including premium on redemption) (xxx)
(6) Repayment of Long-term Loans (xxx)
(7) Buy Back of Equity Shares (xxx)
(8) Dividend Paid (both final dividend and interim dividend) (xxx)
(9) Interest on Long-term Borrowings (e.g. interest on debentures/long-term loan/ (xxx)
x% deposits)
(10)Dividend Tax paid (xxx)
C. Net Cash from (used in) Financing Activities xxx or (xxx)
NET INCREASE (OR DECREASE) IN CASH & CASH EQUIVALENTS (A+B+C) xxx
Add: Cash and Cash Equivalents in the beginning
Cash in hand xxx
Cash at bank xxx
Current Investments (marketable securities) xxx xxx
Cash and cash Equivalents at the end of the year
Cash in hand xxx
Cash at bank xxx
Current Investments (marketable securities) xxx xxx
Working Notes:
1. Calculation of Tax paid/Provision for Tax made during current year (if additional information of tax provision/tax paid is given):
Dr. Provision for Tax A/c Cr.
Particulars Amount (`) Particulars Amount (`)
To Bank A/c (Tax paid) By Balance b/d
To Balance c/d By Statement of Profit and Loss
(Tax provision of current year)

2. When accumulated depreciation account is not appearing in Notes to Accounts:

Dr. Tangible Fixed Assets (e.g. Machinery) A/c Cr.
Particulars Amount (`) Particulars Amount (`)
To Balance b/d By Depreciation
To Statement of Profit and Loss (profit on sale) By Bank A/c (sale)
To Bank A/c (purchase) By Statement of Profit and Loss (loss on sale)
By Balance c/d
 192 EXAM HANDBOOK Accountancy XII (2021 Edition) For CBSE Exam 2021 – by Subhash Dey

When accumulated depreciation account is appearing in Notes to Accounts of Balance Sheet:

Dr. Tangible Fixed Assets (e.g. Machinery) A/c Cr.
Particulars Amount (`) Particulars Amount (`)
To Balance b/d By Bank A/c (proceeds from sale)
To Statement of Profit and Loss (profit on sale)* By Accumulated Depreciation (on fixed asset sold)
To Bank A/c (new fixed assets purchased) By Statement of Profit and Loss (loss on sale)*
By Balance c/d

Dr. Accumulated Depreciation Account Cr.

Particulars Amount (`) Particulars Amount (`)
To Tangible Fixed Assets A/c (accumulated By Balance b/d
depreciation on machinery sold) By Statement of Profit and Loss (Depreciation
To Balance c/d charged during the year)

3. Calculation of Net profit/loss before tax and extraordinary items:

Particulars Amount (`)
Net Profit/Loss after Appropriations (Current year’s balance of Statement of Profit and Loss – Previous year’s figure) xxx or (xxx)
Add: Dividend paid (both final dividend and interim dividend) xxx
Add: Transfer to Reserves (e.g. General reserve) xxx
Add: Provision for Tax made during the current year xxx
Less: Income Tax Refund received (xxx)
Net Profit/Loss before Tax xxx or (xxx)
Less: Insurance proceeds from earthquake disaster settlement (Extraordinary item) Or Add: Loss by fire/ theft (xxx)
Net Profit before Tax and Extraordinary Items xxx or (xxx)

Analysis of Balance Sheet of company for the purpose of preparing Cash Flow Statement
Particulars
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
• Share Capital (It includes Equity share capital and x% Preference share capital.
– If it is increasing, it means – Issue of Shares. It will be shown as ‘Cash Inflow from Financing Activities’.
– If Equity share capital is decreasing, it means – Buy back of equity shares, which is shown as ‘Cash Outflow from Financing Activities’.
– If x% Preference share capital is decreasing, it means – Redemption of preference shares, which is shown as ‘Cash Outflow from Financing Activities’.)
• Reserves and Surplus (It includes i. Surplus i.e. balance in Statement of Profit and Loss ii. General Reserve iii. Securities Premium Reserve.
i. Surplus i.e. balance in Statement of Profit and Loss – It is the basis for calculating Net Profit/Loss before Tax and extraordinary items. Net profit
for the year = Balance of Surplus in current year – Balance of previous year. If it is negative, it means Net loss for the year.
ii. General Reserve – Increase in balance of general reserve means ‘Transfer to General Reserve’, which is added back to Net profit/Loss for the year
while calculating Net Profit/Loss before Tax and extraordinary items.
iii. Securities Premium Reserve – Increase in balance of securities premium reserve will be shown as ‘Cash Inflow from Financing Activities’ because
shares/debentures must have been issued at a premium during the year.)
2. Non-current Liabilities
Long term borrowings (It includes x% debentures, x% long-term bank loan, x% long-term deposits, etc. Here x% is the rate of interest. So interest paid
on long-term borrowings will be calculated, which first will be added to Net profit before tax and extraordinary items while calculating operating profit before
working capital changes, and then will be shown as ‘Cash Outflow from Financing Activities’. Now the balance of long-term borrowing may be increasing or
decreasing.
– If it is increasing, it means ‘Issue of x% debentures or long-term bank loan/long-term deposits raised during the year’, which will be shown as ‘Cash
Inflow from Financing Activities’.
– If it is decreasing, it means ‘Redemption of x% debentures or Repayment of long-term bank loan/long-term deposits during the year’, which will be
shown as ‘Cash Outflow from Financing Activities’.
3. Current Liabilities
• Short-term borrowings (It includes Bank overdraft or Short-term bank borrowings. It is always shown under Financing Activities.
– If it is increasing, it means ‘Bank overdraft or Short-term borrowings raised, which will be shown as ‘Cash Inflow from Financing Activities’.
– If it is decreasing, it means ‘Repayment of Bank overdraft/Short-term borrowings’, which will be shown as ‘Cash Outflow from Financing Activities’.)
• Short-term provisions (It includes mainly Provision for Tax.
i. If additional information about tax is NOT given: Previous year figure of Provision for tax is – Tax paid which is shown as ‘Cash Outflow from Operating
activities’, and Current year figure of Provision for tax is – Tax Provision made during the year which is added to Net profit for the year while calculating
Net Profit/Loss before Tax and extraordinary items.
ii. If additional information about tax is given: Provision for Tax account is prepared to calculate Tax paid or Tax Provision made during the year.)
• Trade payables (These two items of current liabilities are shown under ‘Working Capital Changes’ while calculating ‘Cash flow from
• Other current liabilities Operating Activities’. The rule is – Add: Increase in current liability; Less: Decrease in current liability)

Total
 CHAPTER-9 Cash Flow Statement EXAM HANDBOOK Accountancy XII (2021 Edition) 193

II. ASSETS
1. Non-Current Assets
• Fixed assets
(i) Tangible assets (Tangible assets include plant and machinery, land and building, furniture etc. Depreciation provided on fixed tangible assets will be
added to Net Profit/Loss before Tax and extraordinary items while calculating operating profit before working capital changes.
i. If additional information about Depreciation or Sale or Purchase is NOT given:
– If balance of tangible fixed asset is increasing, it means ‘Purchase of Tangible Fixed Asset’ which will be shown as ‘Cash Outflow from Investing Activites’.
– If balance of tangible fixed asset is decreasing, it means ‘Sale of Tangible Fixed Asset’ usually in case of land and building which will be shown
as ‘Cash Inflow from Investing Activites’. However, decrease in balance of machinery, furniture, etc. must be treated as ‘Depreciation’.
ii. If additional information about Depreciation or Sale or Purchase is given: Tangible Fixed Asset Account is prepared. Accumulated Depreciation/
Provision for Depreciation Account is also prepared if Accumulated Depreciation/Provision for Depreciation is given in Notes to Accounts as
deduction from Tangible Fixed Asset and additional information about Accumulated Depreciation/Provision for Depreciation is also given.
(ii) Intangible assets (Intangible assets include Goodwill, Patents etc.
– If the balance of Intangible asset is increasing, it means ‘Purchase of Intangible asset’, which will be shown as ‘Cash Outflow from Investing Activities’.
– If the balance of Intangible asset is decreasing, it means ‘Intangible asset amortised/written off ’, which will be added to Net Profit/Loss before Tax
and extraordinary items while calculating operating profit before working capital changes.)
• Non-current investments (Non-current investments include x% Government Bonds, Investment in Shares or Debentures of other companies, etc. Here x%
is the rate of interest/dividend on investment. So interest received will be calculated, which first will be subtracted from Net profit before tax and extraordinary
items while calculating operating profit before working capital changes, and then will be shown as ‘Cash Intflow from Investing Activities’. Now the balance
of Non-current investments may be increasing or decreasing.
– If it is increasing, it means ‘Purchase of Non-current investments’, which will be shown as ‘Cash Outflow from Investing Activities’.
– If it is decreasing, it means ‘Sale of Non-current investments’, which will be shown as ‘Cash Inflow from Investing Activities’.
• Long-term loans and advances (It always shown under Investing Activities. If increasing, it means Long-term loans and advances given, which is shown as ‘Cash
Outflow from Investing Activities’. If decreasing, it means Repayment of Long-term loans and advances given, which is shown as ‘Cash Inflow from Investing Activities’)
2. Current Assets
• Current investments (Both of these two items of current assets are treated as ‘Cash and Cash Equivalents’ for the purpose of preparing Cash Flow Statement)
• Cash and cash equivalents
• Short term loans and advances (It always shown under Investing Activities. If increasing, it means Short-term loans and advances given, which is shown as ‘Cash
Outflow from Investing Activities’. If decreasing, it means Repayment of Short-term loans and advances given, which is shown as ‘Cash Inflow from Investing Activities’)
• Inventories
(These three items of current assets are shown under ‘Working Capital Changes’ while calculating ‘Cash flow from
• Trade receivables
Operating Activities’. The rule is – Add: Decrease in current asset; Less: Increase in current asset)
• Other current assets
Total