Match the following for an enterprise while making a cash flow statement:
| LIST 1 | LIST 2 |
| A) Decrease in current assets | I) Contingent liability |
| B) Decrease in current liabilities | II) Not treated in operating profit |
| C) Cash and cash equivalents | III) Added to operating profit before working capital changes |
| D) Proposed dividend for the current year | IV) Deducted from operating profit before working capital changes |
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- A-III, B-IV, C-II, D-I.
| LIST 1 | LIST 2 |
| A) Decrease in current assets | III) Added to operating profit before working capital changes |
| B) Decrease in current liabilities | IV) Deducted from operating profit before working capital changes |
| C) Cash and cash equivalents | II) Not treated in operating profit |
| D) Proposed dividend for the current year | I) Contingent liability |
* Decrease in current assets & Decrease in current liabilities- Increase in current assets and decrease in current liabilities are to be deducted while increase in current liabilities and decrease in current assets are to be added up.
* Cash and cash equivalents- Cash and cash equivalents are shown separately in the cash flow statement. It is not treated in operating profit.
* Proposed dividend for the current year- 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.