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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Kaveri Textiles Ltd, a manufacturing company, has the following items in its books for the year. (i) Interest received on a loan given to a supplier: Rs 40,000. (ii) Dividend paid to equity shareholders: Rs 3,00,000. (iii) Proceeds from sale of an old machine: Rs 1,20,000. (iv) Cash received from customers: Rs 25,00,000. Under AS 3, what is the net cash flow from investing activities of Kaveri Textiles Ltd, assuming interest received is classified as investing as it is a non-financial enterprise?

Net investing cash flow is Rs 1,60,000 inflow. Interest received on a loan by a non-financial company and sale proceeds of a machine are both investing inflows (40,000 plus 1,20,000). Dividend paid is financing and customer receipts are operating, so they are excluded.

  1. ARs 1,60,000 inflowCorrect
  2. BRs 1,20,000 inflow
  3. CRs 4,60,000 inflow
  4. DRs 1,40,000 outflow

Explanation

For a non-financial enterprise, interest received is an investing inflow: 40,000. Sale of machine is an investing inflow: 1,20,000. Total = 1,60,000. Dividend paid is financing and customer receipts are operating. Option Rs 1,20,000 wrongly ignores the interest received.

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