The correct order of items in the Cash Flow Statement should be :
(A) Calculate Net Profit before Tax and Extraordinary items
(B) Cash generated from operation
(C) Net profit as per Balance sheet
(D) Cash flow from Operating Activities
(E) Calculating Operating Profit before working Capital Changes
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (C), (A), (E), (B), (D)
Under the indirect method, cash flow from operating activities is built up from the profit figure in stages.
(C) Net profit as per Balance sheet — first: the net profit of the year (the change in the surplus shown in the Balance Sheet) is the figure from which the starting point is worked out.
(A) Calculate Net Profit before Tax and Extraordinary items — income tax and extraordinary items are added back; this is the starting point of the operating section.
(E) Calculating Operating Profit before working Capital Changes — non-cash and non-operating items (depreciation, interest, gains on sale of assets) are adjusted.
(B) Cash generated from operation — changes in current assets and current liabilities are adjusted.
(D) Cash flow from Operating Activities — income tax paid is deducted last to arrive at the net cash flow.
NCERT (2026-27 edition):
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