Consider the following facts with regard to Cash Flow Statement and identify the correct statements.

A. Proceeds from sale of land will appear under Investing Activities
B. Decrease in value of Inventory is added to the net profit to compute cash flow from Operating Activities.
C. Conversion of Debentures into Equity Shares involve issue of Equity Shares and shown under Financing Activities
D. Issue of Debentures as collateral securities are shown under Investing Activities.
E. Income tax paid is subtracted from Cash generated From operations to compute cash flow from Operating Activities.

Choose the correct answer from the options given below:

A, B and E only

The correct answer is Option (3) - A, B and E only.

A. Proceeds from the sale of land will appear under Investing Activities. This statement is correct. Proceeds from the sale of long-term assets, such as land, are classified as cash flows from investing activities in the Cash Flow Statement.

B. Decrease in the value of inventory is added to the net profit to compute cash flow from Operating Activities. This statement is correct. Changes in inventory are considered operating activities. However, a decrease in the value of inventory would be added to net profit to adjust in the Operating Activities section.

C. Conversion of debentures into equity shares involves the issue of equity shares and is shown under Financing Activities. This statement is incorrect. The conversion of debentures into equity shares is a non cash item so it is included in the cash flow statement.

D. Issue of debentures as collateral securities is shown under Investing Activities. This statement is incorrect. Issuing debentures as collateral securities is a non cash item so it is included in the cash flow statement.

E. Income tax paid is subtracted from cash generated from operations to compute cash flow from Operating Activities. This statement is correct. Income tax paid is a cash outflow and is subtracted from the cash generated from operations to compute the cash flow from operating activities in the Cash Flow Statement.