While computing cash from Operating activities following treatments are done :

A. Increase in value of creditors is added.

B. Increase in income received in advance is added.

C. Decrease in value of inventory is deducted.

D. Increase in value of patent is added.

E. Conversion of debentures into shares is deducted.

Choose the correct answer from the options given below :

A and B only

The correct answer is option 1- A and B only.

A. Increase in value of creditors is added.- This is operating activity and increase in liability which is added to calculate the cash flow from operating activity. 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.

B. Increase in income received in advance is added.- This is operating activity and increase in liability which is added to calculate the cash flow from operating activity. 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.

C. Decrease in value of inventory is deducted.- This is operating activity and decrease in current asset which is added not deducted.

D. Increase in value of patent is added.- This is investing activity.

E. Conversion of debentures into shares is deducted.- This is non cash activity which is not included in cash flow statement.