Practicing Success
If the amount of goodwill is ₹40,000 at the beginning of a year and ₹48,000 at the end of that year then while preparing cash flow statement its effect on cash flow will be: |
Cash used (Payment) in Investing Activities ₹8,000 Cash received from operating activities ₹8,000 Cash used (Payment) from Operating Activities ₹8,000 Cash used (Payment) from Financial Activities ₹8,000 |
Cash used (Payment) in Investing Activities ₹8,000 |
The correct answer is option 1- Cash used (Payment) in Investing Activities ₹8,000. As per AS-3, investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Investing activities relate to purchase and sale of long-term assets or fixed assets such as machinery, furniture, land and building, etc. Transactions related to long-term investment are also investing activities. Cash payments to acquire fixed assets including intangibles and capitalised research and development is an example of Investing activity.
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