Goodwill was of ₹80,000 on March 31st 2023 and was of ₹60,000 on March 31st 2022. How will you treat the above, while preparing cash flow statement for the year ended March 31, 2023?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Outflow of ₹20,000 Cash from Investing Activities
Goodwill is an intangible fixed asset. Its balance rose from ₹60,000 to ₹80,000, so (with no write-off given) goodwill of ₹20,000 was purchased during the year. Cash paid to acquire fixed assets, intangibles included, is a cash outflow from investing activities.
Option (1) Add ₹20,000 in Cash from Operating Activities — Incorrect. Only goodwill written off (a non-cash charge) is added back under operating activities; a purchase is not.
Option (2) Subtract ₹20,000 Cash from Operating Activities — Incorrect. Buying a long-term asset is not an operating activity.
Option (3) Inflow of ₹20,000 in Cash from Investing Activities — Incorrect. An increase in an asset means cash was paid out, not received.
NCERT (2026-27 edition):
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