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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Kaveri Engineering Ltd (a non-financial company) reports the following for the year: purchase of plant ₹8,00,000; sale of long-term investments ₹3,00,000; interest received on investments ₹40,000; dividend received on investments ₹20,000; dividend paid to its shareholders ₹1,00,000. What is the net cash flow from investing activities as per AS 3?

Net cash used in investing activities is ₹4,40,000. Plant purchase is an outflow of ₹8,00,000. Sale of investments, interest received and dividend received bring in ₹3,60,000. Dividend paid belongs to financing activities and is excluded from this figure.

  1. A₹(5,00,000)
  2. B₹(4,40,000)Correct
  3. C₹(5,40,000)
  4. D₹(10,40,000)

Explanation

For a non-financial enterprise, interest and dividends received are investing flows, while dividend paid is a financing flow. Investing = (8,00,000) + 3,00,000 + 40,000 + 20,000 = ₹(4,40,000). Leaving out interest and dividend received gives (5,00,000), and deducting dividend paid wrongly gives (5,40,000).

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