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CA Final · Financial Reporting · Ind AS 7 Statement of Cash Flows

Aarav Industries Ltd (a non-financial entity) reports under Ind AS 7 the following cash items for the year: cash generated from operations Rs 90 lakh before interest, interest paid Rs 14 lakh, interest received Rs 4 lakh, dividend received Rs 3 lakh, dividend paid Rs 10 lakh, purchase of machinery Rs 40 lakh, and proceeds from term loan Rs 30 lakh. Ignore taxes. What are net cash from operating, investing and financing activities respectively?

Operating cash flow is Rs 90 lakh, investing is Rs (33) lakh and financing is Rs 6 lakh. Under Ind AS 7, interest and dividend received go to investing, while interest paid and dividend paid go to financing, so none of them alters operating cash flow.

  1. ARs 80 lakh; Rs (33) lakh; Rs 6 lakh
  2. BRs 90 lakh; Rs (33) lakh; Rs 6 lakhCorrect
  3. CRs 90 lakh; Rs (40) lakh; Rs 30 lakh
  4. DRs 90 lakh; Rs (40) lakh; Rs 6 lakh

Explanation

Operating = Rs 90 lakh, as interest and dividends are not operating items. Investing = (40) + 4 + 3 = Rs (33) lakh. Financing = 30 - 14 interest - 10 dividend = Rs 6 lakh. Check: total 90 - 33 + 6 = 63 lakh, equal to 90 + 4 + 3 - 14 - 10 - 40 + 30 = 63. The option deducting interest paid in operating wrongly applies the IAS 7 choice.

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