Accountancy Part BCash Flow Statement

Arrange the following steps of Cash flow from Operating Activities in…

Arrange the following steps of Cash flow from Operating Activities in correct sequence.

A. Cash flow from Operating Activities
B. Cash generated from operation
C. Net profit/loss before tax and extraordinary items
D. Income tax paid
E. Operating profit before working capital changes

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → C, E, B, D, A

Under the indirect method the calculation runs from profit to net cash:

(C) Net profit/loss before tax and extraordinary items – the starting point.

(E) Operating profit before working capital changes – after adding back non-cash and non-operating items.

(B) Cash generated from operations – after adjusting the changes in current assets and current liabilities.

(D) Income tax paid – deducted next.

(A) Cash flow from operating activities – the final figure.

NCERT (2026-27 edition):
Illustration

Extract from the NCERT textbook

NCERT (2026-27 edition):
(Indirect Method) – “… As stated earlier, while working out the cash flow from operating activities, the starting point is the ‘Net profit before tax and extraordinary items’ and not the ‘Net profit as per Statement of Profit and Loss’. Income tax paid is deducted as the last item to arrive at the net cash flow from operating activities.”