Arrange the following items to be in order while making Cash Flow Statement as per AS.3
(a) Income Tax paid
(b) Purchase of Furniture
(c) Goodwill written off
(d) Debentures issued
(e) Shares purchased
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (c), (a), (b), (e), (d)
A cash flow statement shows operating activities first, then investing activities, then financing activities. Inside operating activities, non-cash items are adjusted first and income tax paid comes last.
(c) Goodwill written off — first. It is a non-cash item, added back to the net profit at the start of the operating activities section.
(a) Income Tax paid — second. It is deducted as the last item of operating activities, to arrive at the net cash flow from operating activities.
(b) Purchase of Furniture — third. Furniture is a fixed asset, so paying for it is a cash outflow from investing activities.
(e) Shares purchased — fourth. Shares of other companies bought as an investment are also an investing outflow, so they stay in the investing section, before financing.
(d) Debentures issued — last. Money raised by issuing debentures is a financing inflow, and financing activities come last.
NCERT (2026-27 edition): Indirect Method – “… As stated earlier, while working out the cash flow from operating activities, the starting point is the ‘Net profit before tax and extraordinary items’ and not the ‘Net profit as per Statement of Profit and Loss’. Income tax paid is deducted as the last item to arrive at the net cash flow from operating activities.” Cash from Investing Activities – “… Cash Outflows from investing activities Cash from Financing Activities – “… Cash Inflows from financing activities Cash Flow Statement (Main heads only)
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