The correct answer is Option (1) → (D), (E), (C), (B), (A)
(A) Closing Balance of Cash-
(B) Repayment of Bank Loan- This is financing activity
(C) Purchase of Machinery- This is investing activity
(D) Net profit before tax and extraordinary items- This is calculated first and adjustments are made.
(E) Adding and Deducting the changes in working capital
This is the correct sequence of preparing cash flow statement-
(A) Cash flows from operating activities
(B) Cash flows from investing activities
(C) Cash flows from financing activities
Net increase (decrease) in cash and cash equivalents (A + B + C)
+ Cash and cash equivalents at the beginning
= Cash and cash equivalents at the end.
CASH FLOW FROM OPERATING ACTIVITIES-
Net Profit/Loss before Tax and Extraordinary Items
ADD: Deductions already made in Statement of Profit and Loss on account of Non-cash items such as Depreciation, Goodwill to be Written-off.
ADD: Deductions already made in Statement of Profit and Loss on Account of Non-operating items such as Interest.
DEDUCT: Additions (incomes) made in Statement of Profit and Loss on Account of Non-operating items such as Dividend received, Profit on sale of Fixed Assets
Operating Profit before Working Capital changes
Add : in case of increase in current assets (other than cash and cash equivalent) and decrease in current liabilities.
Less : in case of decrease in current assets (other than cash and cash equivalent) and decrease in current liabilities.
Cash Flows from Operation Activities before Tax and Extraordinary items
– Income Tax Paid
+/–Effects of Extraordinary Items | 
