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Cash Flow Statement

NCERT Class 12 · Accountancy Based on NCERT Class 12 Accountancy textbook · Free CBSE study kit

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Chapter Notes

Overview
This chapter introduces the Cash Flow Statement, the third major financial statement after the Position Statement and Income Statement. It explains how to classify cash flows into operating, investing, and financing activities, and how to prepare the statement using both direct and indirect methods. The one big idea a student must walk away with is that a cash flow statement shows the historical movement of cash and cash equivalents, helping users assess a company's ability to generate cash, meet obligations, and fund future growth.
Key Concepts (12)
Cash Flow Statement
A financial statement that shows inflows and outflows of cash and cash equivalents from various activities of an enterprise during a specific period.
e.g. A company preparing its annual report includes a cash flow statement to show how it generated cash from sales and used it to buy machinery and pay dividends.
Cash
Comprises cash in hand and demand deposits with banks.
e.g. Cash in the company's safe and money in a current account that can be withdrawn anytime.
Cash Equivalents
Short-term, highly liquid investments that are readily convertible into known amounts of cash and subject to an insignificant risk of changes in value, typically with a maturity of three months or less from the date of acquisition.
e.g. A 90-day treasury bill or a fixed deposit maturing in two months.
Cash Flows
Movement of cash in and out due to non-cash items; receipt of cash is cash inflow and payment is cash outflow.
e.g. Sale of goods for cash is an inflow; payment to a supplier is an outflow.
Operating Activities
The principal revenue-generating activities of an enterprise that are not investing or financing activities.
e.g. For a garment manufacturer, operating activities include procurement of raw material, manufacturing, and sale of garments.
Investing Activities
The acquisition and disposal of long-term assets and other investments not included in cash equivalents.
e.g. Purchase of machinery or sale of a building.
Financing Activities
Activities that result in changes in the size and composition of owners' capital and borrowings of the enterprise.
e.g. Issue of equity shares, redemption of debentures, or repayment of a bank loan.
Direct Method
A method of reporting cash flows from operating activities whereby major classes of gross cash receipts and gross cash payments are disclosed.
e.g. Showing 'Cash received from customers' and 'Cash paid to suppliers' as separate line items.
Indirect Method
A method of reporting cash flows from operating activities whereby net profit or loss is adjusted for non-cash items, deferrals/accruals, and items of income/expense associated with investing or financing cash flows.
e.g. Starting with net profit, adding back depreciation, and adjusting for changes in working capital.
Extraordinary Items
Non-recurring items such as loss due to theft, earthquake, or flood, which are classified and disclosed separately as arising from operating, investing, or financing activities.
e.g. A loss due to an earthquake is shown separately under operating activities after tax.
Non-cash Transactions
Investing and financing transactions that do not require the use of cash or cash equivalents, and are excluded from the cash flow statement.
e.g. Acquisition of machinery by issue of equity shares or redemption of debentures by issue of shares.
Proposed Dividend
Dividend proposed by the board but not yet declared by shareholders; shown as a contingent liability in notes to accounts and added back to net profit under operating activities while shown as an outflow under financing activities.
e.g. Previous year's proposed dividend of Rs. 50,000 is added to net profit and shown as a financing outflow in the current year.
Formulas & Equations (3)
Net Cash from Operating Activities (Indirect Method) = Net Profit/Loss before Tax and Extraordinary Items + Non-cash items (e.g., Depreciation, Goodwill written-off) + Non-operating expenses (e.g., Interest) – Non-operating incomes (e.g., Profit on sale of fixed assets, Dividend received) ± Changes in Working Capital – Income Tax Paid ± Extraordinary Items
Reads as: Net cash from operating activities equals net profit before tax and extraordinary items, plus non-cash and non-operating expenses, minus non-operating incomes, adjusted for changes in working capital, minus income tax paid, plus or minus extraordinary items.
Variables: Net Profit/Loss before Tax and Extraordinary Items: profit before tax and unusual items (Rs.); Non-cash items: expenses not involving cash outflow (Rs.); Non-operating expenses: expenses related to financing/investing (Rs.); Non-operating incomes: incomes from financing/investing (Rs.); Changes in Working Capital: increase/decrease in current assets and liabilities (Rs.); Income Tax Paid: cash paid for income tax (Rs.); Extraordinary Items: unusual gains/losses (Rs.)
Use when: Use when preparing the cash flow statement using the indirect method, starting from net profit.
⚠ Students forget to add back non-cash items like depreciation or incorrectly treat an increase in current assets as an addition instead of a deduction.
Net Increase/Decrease in Cash and Cash Equivalents = Cash Flows from Operating Activities + Cash Flows from Investing Activities + Cash Flows from Financing Activities
Reads as: Net increase or decrease in cash and cash equivalents equals the sum of cash flows from operating, investing, and financing activities.
Variables: Cash Flows from Operating Activities: net cash from operations (Rs.); Cash Flows from Investing Activities: net cash from investing (Rs.); Cash Flows from Financing Activities: net cash from financing (Rs.)
Use when: Use to calculate the overall change in cash and cash equivalents during the period.
⚠ Students forget to include the opening and closing balances of cash and cash equivalents to verify the final figure.
Cash and Cash Equivalents at the End = Cash and Cash Equivalents at the Beginning + Net Increase/Decrease in Cash and Cash Equivalents
Reads as: Cash and cash equivalents at the end equals cash and cash equivalents at the beginning plus the net increase or decrease during the period.
Variables: Cash and Cash Equivalents at the Beginning: opening balance (Rs.); Net Increase/Decrease: change from the three activities (Rs.)
Use when: Use to compute the closing balance of cash and cash equivalents, which must match the balance sheet figure.
⚠ Students forget to add the opening balance, leading to an incorrect closing balance.
How It Works
Classification of Activities for Cash Flow Statement
  1. Step 1: Identify all cash inflows and outflows during the period.
  2. Step 2: Classify each cash flow into one of three categories: operating, investing, or financing.
  3. Step 3: For operating activities, decide whether to use the direct method (gross receipts and payments) or indirect method (adjust net profit).
  4. Step 4: For investing activities, include cash flows from purchase/sale of long-term assets and non-current investments.
  5. Step 5: For financing activities, include cash flows from changes in equity and borrowings.
  6. Step 6: Sum the net cash flows from all three activities to find the net increase/decrease in cash and cash equivalents.
  7. Step 7: Add the opening balance of cash and cash equivalents to arrive at the closing balance.
💡 Students often misclassify interest and dividends: for non-financial enterprises, interest and dividends received are investing activities, while interest and dividends paid are financing activities.
Ascertaining Cash Flow from Operating Activities (Indirect Method)
  1. Step 1: Start with Net Profit before Tax and Extraordinary Items.
  2. Step 2: Add back non-cash items (e.g., depreciation, goodwill amortised, provisions).
  3. Step 3: Add back non-operating expenses (e.g., finance costs, loss on sale of fixed assets).
  4. Step 4: Deduct non-operating incomes (e.g., profit on sale of fixed assets, dividend received, interest received).
  5. Step 5: Adjust for changes in working capital: add increase in current liabilities and decrease in current assets; deduct increase in current assets and decrease in current liabilities.
  6. Step 6: Deduct income tax paid (unless specifically identified with investing/financing activities).
  7. Step 7: Add or subtract extraordinary items as per their nature.
💡 A common mistake is to treat an increase in trade receivables as an addition instead of a deduction, because it represents cash not yet collected.
Treatment of Proposed Dividend in Cash Flow Statement
  1. Step 1: Identify the proposed dividend of the previous year that is declared (approved) in the current year.
  2. Step 2: Add the previous year's proposed dividend to the net profit under operating activities (since it was deducted in profit and loss but not yet paid).
  3. Step 3: Show the payment of that dividend as a cash outflow under financing activities.
  4. Step 4: The current year's proposed dividend is not shown in the cash flow statement until it is declared and paid.
💡 Students often forget to add back the proposed dividend to net profit, or they incorrectly show it as an operating outflow instead of a financing outflow.
Treatment of Extraordinary Items
  1. Step 1: Identify the extraordinary item (e.g., loss due to earthquake).
  2. Step 2: Classify it as operating, investing, or financing based on its nature.
  3. Step 3: Show the cash flow from the extraordinary item separately under the relevant activity.
  4. Step 4: Disclose it separately to help users understand its effect on present and future cash flows.
💡 Extraordinary items are not regular; they must be shown separately and not merged with normal operating cash flows.
Exam Traps — Don't Make These Mistakes
⚠ Misclassifying Interest and Dividends
✗ Interest paid is shown under operating activities, and dividend received is shown under financing activities.
→ For a non-financial enterprise, interest paid is a financing activity, and dividend received is an investing activity. Only for financial enterprises are these operating activities.
✓ Interest paid is a financing activity; dividend received is an investing activity (for non-financial enterprises).
⚠ Forgetting to Add Back Non-Cash Items
✗ Net profit is taken as is, without adding back depreciation or goodwill amortised.
→ Depreciation and amortisation are non-cash charges that reduce net profit but do not involve any cash outflow. They must be added back to convert accrual profit to cash basis.
✓ Add back depreciation, goodwill amortised, and other non-cash items to net profit before tax.
⚠ Incorrect Working Capital Adjustment Signs
✗ Increase in trade receivables is added to net profit; decrease in trade payables is added.
→ An increase in trade receivables means cash has not been collected, so it should be deducted. A decrease in trade payables means cash was paid out, so it should also be deducted.
✓ Increase in current assets is deducted; decrease in current liabilities is deducted. Increase in current liabilities is added; decrease in current assets is added.
⚠ Confusing Direct and Indirect Methods
✗ Under the direct method, start with net profit and adjust for non-cash items.
→ The direct method starts with gross cash receipts and payments, not net profit. The indirect method starts with net profit.
✓ Under the direct method, disclose major classes of gross cash receipts and payments (e.g., cash from customers, cash to suppliers). Under the indirect method, start with net profit and adjust.
⚠ Including Non-Cash Transactions in Cash Flow Statement
✗ Acquisition of machinery by issue of shares is shown as a cash outflow under investing activities and a cash inflow under financing activities.
→ Non-cash transactions do not involve any cash movement and are excluded from the cash flow statement. They are disclosed elsewhere in the financial statements.
✓ Do not include non-cash transactions like acquisition of assets by issue of shares in the cash flow statement.
Compare & Contrast
Approach to calculating cash flow from operating activities
Direct Method
Indirect Method
Direct method shows gross cash receipts and payments (e.g., cash from customers), while indirect method starts with net profit and adjusts for non-cash items and working capital changes.
Nature of cash flows
Operating Activities
Investing Activities
Operating activities are the principal revenue-generating activities (e.g., sale of goods), while investing activities relate to acquisition and disposal of long-term assets (e.g., purchase of machinery).
Liquidity and risk
Cash
Cash Equivalents
Cash includes cash in hand and demand deposits, while cash equivalents are short-term, highly liquid investments with insignificant risk of value change and maturity of three months or less.
Exam Focus
Marks pattern: 2 MCQs (1 mark each), 1 SA (3 marks) on classification or adjustments, 1 LA (6 marks) on full cash flow statement preparation
Most asked: Classification of activities into operating, investing, and financing · Preparation of cash flow statement using indirect method · Treatment of proposed dividend and tax · Adjustments for non-cash items and working capital changes
Don't skip: Prepare a complete cash flow statement from given balance sheets and additional information (6 marks); Calculate cash flow from operating activities using indirect method (3-4 marks)
One-Line Revision (read aloud before the exam)
  1. Cash flow statement shows inflows and outflows of cash and cash equivalents classified into operating, investing, and financing activities.
  2. Cash includes cash in hand and demand deposits; cash equivalents are short-term, highly liquid investments with maturity of three months or less.
  3. Operating activities are the principal revenue-generating activities of an enterprise.
  4. Investing activities involve acquisition and disposal of long-term assets and other investments not included in cash equivalents.
  5. Financing activities result in changes in the size and composition of owners' capital and borrowings.
  6. Under the indirect method, start with net profit before tax and extraordinary items, add back non-cash items, and adjust for working capital changes.
  7. Increase in current assets is deducted; decrease in current assets is added; increase in current liabilities is added; decrease in current liabilities is deducted.
  8. For non-financial enterprises, interest and dividends received are investing activities; interest and dividends paid are financing activities.
  9. Non-cash transactions like acquisition of assets by issue of shares are excluded from the cash flow statement.
  10. Proposed dividend of the previous year is added back to net profit under operating activities and shown as an outflow under financing activities.
  11. Extraordinary items are classified and disclosed separately under the relevant activity.
  12. The closing balance of cash and cash equivalents must match the balance sheet figure.

MCQs — 10 Questions with Answers

Q1. As per AS-3, which of the following is NOT classified as a Cash Equivalent?

  • A. Short-term Treasury Bills with 2 months maturity
  • B. Preference shares of a company with redemption date within 3 months
  • C. Equity shares acquired as short-term investment ✓
  • D. Marketable securities with 60 days maturity

Answer: C — Equity shares are never treated as cash equivalents; only highly liquid short-term investments with insignificant value change risk qualify.

Q2. Which item requires ADD BACK when calculating Operating Cash Flow using the Indirect Method?

  • A. Increase in Trade Receivables
  • B. Depreciation on Plant & Machinery ✓
  • C. Decrease in Trade Payables
  • D. Profit on sale of Fixed Asset

Answer: B — Depreciation is a non-cash expense deducted in Net Profit, so it must be added back to convert accrual profit to cash basis.

Q3. Opening Cash Balance is ₹50,000. If Operating CF = ₹80,000, Investing CF = (₹30,000), and Financing CF = ₹10,000, what is Closing Cash Balance?

  • A. ₹1,10,000 ✓
  • B. ₹90,000
  • C. ₹60,000
  • D. ₹70,000

Answer: A — Closing Cash = Opening ₹50,000 + Operating ₹80,000 – Investing ₹30,000 + Financing ₹10,000 = ₹1,10,000.

Q4. A decrease in Inventory of ₹5,000 during the year would be treated in Operating Activities as:

  • A. Deducted from Net Profit
  • B. Added to Net Profit ✓
  • C. Shown in Investing Activities
  • D. Shown in Financing Activities

Answer: B — Decrease in Inventory is a source of cash (inventory was sold), so it is added when calculating Operating Cash Flow.

Q5. Which of the following is correctly classified under Operating Activities?

  • A. Purchase of Land for expansion
  • B. Issuance of new Equity Shares
  • C. Payment of wages to employees ✓
  • D. Repayment of long-term loan

Answer: C — Payment of wages is a principal revenue-generating activity expense; A is Investing, B and D are Financing activities.

Q6. Both Assertion and Reason given below. Which is correct? Assertion (A): Cash Flow Statement is mandatory for all companies under Companies Act 2013. Reason (R): AS-3 (Cash Flow Statement) is notified under Section 133 of Companies Act 2013.

  • A. Both A and R are correct; R is the correct reason for A ✓
  • B. Both A and R are correct; R is NOT the correct reason for A
  • C. A is correct but R is incorrect
  • D. A is incorrect but R is correct

Answer: A — Both statements are true and directly linked: AS-3 being notified under Section 133 makes Cash Flow Statement mandatory.

Q7. A company received ₹40,000 as dividend from its investments. In the Cash Flow Statement, this should be shown under:

  • A. Investing Activities
  • B. Operating Activities ✓
  • C. Financing Activities
  • D. Cannot be classified

Answer: B — Dividend received is treated as a revenue-generating activity and classified under Operating Activities, not Investing (which covers asset purchases/sales only).

Q8. If a company sold Machinery costing ₹10,000 with accumulated depreciation ₹4,000 for ₹7,500, the cash flow entry would show:

  • A. ₹7,500 inflow in Investing Activities
  • B. Loss of ₹2,500 in Operating Activities
  • C. Both: ₹7,500 inflow in Investing + Loss ₹2,500 added back in Operating ✓
  • D. Only ₹5,000 inflow (Book Value) in Investing

Answer: C — Asset sale of ₹7,500 is Investing inflow; loss (₹10,000 – ₹7,500 = ₹2,500) is non-cash, so added back in Operating CF.

Q9. An increase in Trade Payables from ₹20,000 to ₹35,000 during the year indicates:

  • A. Use of cash of ₹15,000
  • B. Source of cash of ₹15,000 ✓
  • C. Outflow of cash in Investing Activities
  • D. Financing Activity entry

Answer: B — Increase in payables means company delayed payments (retained cash longer), so it is a source of cash added in Operating Activities.

Q10. HOTS: A company shows Net Profit of ₹1,00,000 but Operating Cash Flow of only ₹20,000. Which combination of events best explains this? (Assume no change in Fixed Assets or Investments)

  • A. High depreciation + large increase in receivables + decrease in payables ✓
  • B. Low depreciation + large decrease in receivables + increase in payables
  • C. High depreciation + large increase in inventory + large increase in receivables
  • D. No depreciation + decrease in inventory + large collection from customers

Answer: A — High depreciation (non-cash) reduces profit but not cash; increase in receivables and decrease in payables both use cash, explaining the gap between profit and cash flow.

Flashcards

What is the primary objective of a Cash Flow Statement?

To provide information about inflows and outflows of cash and cash equivalents from operating, investing, and financing activities during a specific period.

Define Cash as per AS-3.

Cash comprises cash in hand and demand deposits with banks only.

What qualifies as a Cash Equivalent?

Short-term, highly liquid investments (maturity ≤3 months from acquisition date) readily convertible to cash with insignificant risk of value change.

Name the three categories of activities classified in a Cash Flow Statement.

Operating activities, investing activities, and financing activities.

What are Operating Activities?

Principal revenue-generating activities of the enterprise such as procurement of raw materials, manufacturing, and sale of goods.

Why is depreciation added back when preparing cash flow statement using indirect method?

Because depreciation is a non-cash expense deducted in calculating Net Profit but does not involve actual cash outflow.

Which method of cash flow statement preparation starts with Net Profit from P&L?

Indirect method, which adjusts Net Profit for non-cash items and working capital changes.

How do changes in Trade Receivables affect cash flow?

Increase in Trade Receivables is a use of cash (subtract), while decrease is a source of cash (add).

Is purchase of marketable securities considered in cash flow statement?

No, because marketable securities that constitute cash equivalents are part of cash management, not cash flow.

Which activities indicate the internal solvency level of a company?

Operating activities, as they show whether core business operations generate sufficient cash independently without external financing.

Important Board Questions

Define Cash and Cash Equivalents as per AS-3. Give one example of each. [2 marks]

Cash = in-hand + demand deposits only; Cash Equivalents = short-term liquid (≤3 months) investments like T-bills, NOT shares (except redeemable preference shares near maturity).

A company had Opening Cash ₹30,000. During the year: Operating Activities generated ₹60,000, Investing Activities used ₹25,000, and Financing Activities used ₹15,000. Calculate the Closing Cash Balance and state two benefits of analyzing this statement for users. [5 marks]

Use formula: Opening Cash + Operating CF – Investing CF – Financing CF = Closing Cash. Benefits include assessing liquidity/solvency, ability to generate cash independently, and comparing with other companies eliminating accounting treatment differences.

Explain how the Indirect Method converts Net Profit to Operating Cash Flow. Show the adjustments required for: (i) Depreciation of ₹8,000, (ii) Loss on sale of machinery ₹2,000, and (iii) Increase in Trade Receivables ₹5,000. State why each adjustment is made. [6 marks]

Start: Net Profit → Add non-cash expenses (depreciation ₹8,000, loss ₹2,000) → Subtract working capital increases using cash (receivables ₹5,000). Depreciation/loss added because non-cash; receivables subtracted because converted to sales but cash not received yet.

Assertion-Reason Questions for Cash Flow Statement

Q1. Assertion (A):

AS-3 requires enterprises to prepare and present a cash flow statement for each accounting period for which financial statements are prepared.

Reason (R):

The cash flow statement is mandatory under the Companies Act, 2013 because it provides information about historical changes in cash and cash equivalents.

Answer: A — Both A and R are true, and R is the correct explanation of A — Both the assertion and reason are true. AS-3 is mandatory under Companies Act 2013 (Section 133), and the reason correctly explains why—because the statement provides essential information about cash movements that complement the position and income statements.

Q2. Assertion (A):

Investment in equity shares can be classified as a cash equivalent under AS-3.

Reason (R):

Equity shares carry significant risk of changes in value and hence do not meet the definition of short-term, highly liquid investments.

Answer: D — A is false but R is true — The assertion is false — AS-3 explicitly excludes equity share investments from cash equivalents. The reason is true: equity shares carry significant value risk (unlike, say, short-term treasury bills), which is exactly why they fail AS-3's cash equivalent test.

Q3. Assertion (A):

The amount of cash from operating activities indicates the internal solvency level of a company.

Reason (R):

Operating cash flow shows whether the company generates sufficient cash to pay dividends, invest, and repay loans without external financing.

Answer: A — Both A and R are true, and R is the correct explanation of A — Both assertion and reason are true and logically connected. Operating cash flow is the key indicator of internal solvency because it demonstrates the ability to sustain operations and meet obligations from internal cash generation, independent of external sources.

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Case-Based Questions (CBQ) for Cash Flow Statement

Case Study:

Aryan Enterprises Ltd., a manufacturing company in Mumbai, reported a net profit of ₹8,00,000 for the year ended March 31, 2026. The following additional information is extracted from its financial statements: Depreciation charged on machinery ₹1,20,000; Goodwill amortised ₹40,000; Loss on sale of furniture ₹10,000; Increase in Trade Receivables ₹60,000; Decrease in Inventory ₹30,000; Increase in Trade Payables ₹50,000.

Q1. What is the net cash flow from operating activities for Aryan Enterprises Ltd. for the year ended March 31, 2026, as per the indirect method?

  • A. ₹9,90,000 ✓
  • B. ₹9,50,000
  • C. ₹9,70,000
  • D. ₹8,70,000

Answer: A

Q2. Why is the increase in Trade Receivables deducted while computing cash flow from operating activities in the indirect method?

  • A. It represents a decrease in current assets, increasing cash flow.
  • B. It represents an increase in current liabilities, decreasing cash flow.
  • C. It represents a decrease in cash due to credit sales not yet collected. ✓
  • D. It represents a non-cash expense that must be added back.

Answer: C

Q3. In the given passage, which of the following items is treated as a non-cash expense that is added back to net profit while calculating cash flow from operating activities?

  • A. Increase in Trade Payables
  • B. Decrease in Inventory
  • C. Loss on sale of furniture ✓
  • D. Increase in Trade Receivables

Answer: C

Q4. If the decrease in Inventory was ₹30,000 and the increase in Trade Payables was ₹50,000, what is the combined effect of these two changes on the net cash flow from operating activities?

  • A. Increase by ₹80,000 ✓
  • B. Decrease by ₹80,000
  • C. Increase by ₹20,000
  • D. Decrease by ₹20,000

Answer: A

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Previous Year Questions (PYQ) for Cash Flow Statement

Real CBSE board exam questions from past papers — free to attempt.

CBSE 2026 · Set 67/3/1 · 1 mark

Which of the following are operating activities in Cash Flow Statement? (i) Payment of taxes (ii) Payment of dividend and interest (iii) Receipt of interest and dividend

  • (i), (ii) and (iii)
  • (i) and (ii)
  • (ii) and (iii)
  • (iii) only

CBSE 2026 · Set 67/3/1 · 1 mark

Statement I: Operating activities are the activities that constitute the primary or main activities of an enterprise. Statement II: Cash advances and loans made by financial enterprises are usually classified as operating activities. Choose the correct option from the following:

  • Both the Statements are false.
  • Statement I is true and Statement II is false.
  • Statement I is false and Statement II is true.
  • Both the Statements are true.

CBSE 2026 · Set 67/3/1 · 6 marks

JC Ltd. earned a net profit of ₹50,000 after providing depreciation of ₹20,000 on fixed assets and a transfer of ₹15,000 to general reserve. The position of its Current Assets and Current Liabilities was as follows: Particulars 31.03.2025 (₹) 31.03.2024 (₹) Trade Receivables 75,000 70,000 Trade Payables 75,000 65,000 Inventories 40,000 25,000 Expenses Payable 7,500 5,000 Prepaid Expenses 5,000 10,000 Accrued Incomes 20,000 15,000 Income Received in Advance 5,000 10,000 Calculate cash flows from operating activities.

CBSE 2026 · Set 67/3/2 · 1 mark

Items: (i) Payment of taxes (ii) Payment of dividend and interest (iii) Receipt of interest and dividend

Which of the following items are included in Cash Flow from Operating Activities?

  • (i), (ii) and (iii)
  • (i) and (ii)
  • (ii) and (iii)
  • (iii) only

CBSE 2026 · Set 67/3/2 · 6 marks

JC Ltd. earned a net profit of 50,000 after providing depreciation of 20,000 on fixed assets and a transfer of 15,000 to general reserve. The position of its Current Assets and Current Liabilities was as follows: Particulars 31.03.2025 (₹) 31.03.2024 (₹) Trade Receivables 75,000 70,000 Trade Payables 75,000 65,000 Inventories 40,000 25,000 Expenses Payable 7,500 5,000 Prepaid Expenses 5,000 10,000 Accrued Incomes 20,000 15,000 Income Received in Advance 5,000 10,000 Calculate cash flows from operating activities.

CBSE 2026 · Set 67/3/3 · 1 mark

Which of the following items are shown in the Cash Flow Statement under operating activities? (i) Payment of taxes (ii) Payment of dividend and interest (iii) Receipt of interest and dividend

  • (i), (ii) and (iii)
  • (i) and (ii)
  • (ii) and (iii)
  • (iii) only

CBSE 2026 · Set 67/3/3 · 1 mark

Which of the following statements is correct?

  • Sale of property is a financing activity.
  • Cash deposited into bank will result in outflow of cash.
  • Receipt of royalties is an operating activity.
  • Buy-back of own equity shares is an investing activity.

CBSE 2026 · Set 67/3/3 · 6 marks

JC Ltd. earned a net profit of ₹50,000 after providing depreciation of ₹20,000 on fixed assets and a transfer of ₹15,000 to general reserve. The position of its Current Assets and Current Liabilities was as follows: Trade Receivables: 75,000 (31.03.2025), 70,000 (31.03.2024); Trade Payables: 75,000 (31.03.2025), 65,000 (31.03.2024); Inventories: 40,000 (31.03.2025), 25,000 (31.03.2024); Expenses Payable: 7,500 (31.03.2025), 5,000 (31.03.2024); Prepaid Expenses: 5,000 (31.03.2025), 10,000 (31.03.2024); Accrued Incomes: 20,000 (31.03.2025), 15,000 (31.03.2024); Income Received in Advance: 5,000 (31.03.2025), 10,000 (31.03.2024). Calculate cash flows from operating activities.

CBSE 2026 · Set 67/4/1 · 1 mark

Statement I: Quick Credit Ltd., a finance company, paid interest on borrowings amounting to ₹80,000. This will be shown as cash outflow from operating activities in its Cash Flow Statement. Statement II: Royal Foods Ltd., a non-financial enterprise, paid dividends amounting to ₹2,30,000. It will be shown as cash outflow from operating activities in its Cash Flow Statement. Choose the correct option from the following:

  • Statement I is true and Statement II is false.
  • Statement I is false and Statement II is true.
  • Both the Statements are true.
  • Both the Statements are false.

CBSE 2026 · Set 67/4/1 · 1 mark

The following information was obtained about the cash flows of XYZ Ltd. for the year ended 31st March, 2025: Cash inflows from operating activities ₹28,000; cash used in investing activities ₹32,000 and cash inflows from financing activities ₹5,000. If the opening balance of cash and cash equivalents on 1st April, 2024 was ₹25,000, the closing balance of cash and cash equivalents on 31st March, 2025 will be:

  • ₹90,000
  • ₹6,000
  • ₹26,000
  • ₹70,000

CBSE 2026 · Set 67/4/1 · 6 marks

From the following information, calculate Cash Flows from Investing Activities: Particulars 31.03.2025 (₹) 31.03.2024 (₹): Machinery (At Cost) 6,00,000 2,60,000; Accumulated Depreciation 1,00,000 35,000. Additional Information: During the year, a machine costing ₹80,000 on which accumulated depreciation was ₹20,000, was sold at a loss of 20%.

CBSE 2026 · Set 67/4/2 · 6 marks

From the following information, calculate Cash Flows from Investing Activities: Particulars 31.03.2025 (₹) 31.03.2024 (₹) Machinery (At Cost) 6,00,000 2,60,000 Accumulated Depreciation 1,00,000 35,000 Additional Information: During the year, a machine costing ₹80,000 on which accumulated depreciation was ₹20,000, was sold at a loss of 20%.

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