As per AS 3 (Revised) while preparing cash flow statement the correct sequence to be followed is:
A. Calculation of Cash flow from Financing Activities
B. Calculation of cash flow from Operating Activities
C. Calculation of cash flow from Investing Activities
D. Calculation of net changes in cash and cash equivalents during the year
E. Calculation of net profit before tax and extra-ordinary items
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → E, B, C, A, D
Under the indirect method the work begins with the profit figure and ends with the net change in cash:
E. Calculation of net profit before tax and extra-ordinary items — the starting point.
B. Calculation of cash flow from Operating Activities — the net profit is adjusted for non-cash and non-operating items.
C. Calculation of cash flow from Investing Activities — head (B) of the statement.
A. Calculation of Cash flow from Financing Activities — head (C) of the statement.
D. Calculation of net changes in cash and cash equivalents during the year — the total of the three heads, found last.
NCERT (2026-27 edition): NCERT (2026-27 edition):
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