Question 11 of 22intermediate💡 UnderstandShort Answer3 marks
Prepare a format of cash flow from operating activities.
Correct Answer
Cash Flows from Operating Activities (Indirect Method)
| Particulars | Amount (Rs.) |
|---|---|
| Net Profit/Loss before Tax and Extraordinary Items | xxx |
| (+) Deductions already made in Statement of Profit and Loss on account of Non-cash items such as Depreciation, Goodwill to be Written-off | xxx |
| (+) Deductions already made in Statement of Profit and Loss on Account of Non-operating items such as Interest | xxx |
| (–) Additions (incomes) made in Statement of Profit and Loss on Account of Non-operating items such as Dividend received, Profit on sale of Fixed Assets | xxx |
| Cash Flow from Operating Activities | xxx |
Exercise: Short Answer Questions | Q: 6 | (Page 36)
For More Understanding
Explanation
The textbook provides Exhibit 6.4 which shows the proforma for calculating cash flows from operating activities using the indirect method. The format starts with Net Profit/Loss before Tax and Extraordinary Items, then adds back non-cash items (like Depreciation) and non-operating deductions (like Interest), and subtracts non-operating incomes (like Dividend received, Profit on sale of Fixed Assets). This is a standard 3-mark question requiring students to reproduce the format from the textbook.