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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Narmada Foods Ltd. sold a plant with a book value of ₹4,20,000 at a loss of ₹70,000. It also purchased new machinery for ₹9,00,000, paying ₹6,00,000 in cash and the balance by issuing equity shares to the supplier. It received ₹1,50,000 as dividend from investments. What is the net cash flow from investing activities?

Net investing outflow is ₹1,00,000. Sale proceeds of ₹3,50,000 and dividend of ₹1,50,000 are inflows, while only the ₹6,00,000 cash paid for machinery is an outflow, because the share-issued portion is a non-cash transaction excluded from the statement.

  1. A₹(1,00,000) outflowCorrect
  2. B₹(1,50,000) outflow
  3. C₹(2,50,000) outflow
  4. D₹(4,00,000) outflow

Explanation

Sale proceeds = 4,20,000 - 70,000 = 3,50,000 inflow. Cash purchase = 6,00,000 outflow; the share-based part of 3,00,000 is a non-cash transaction and is excluded. Dividend received 1,50,000 is an investing inflow. Net = 3,50,000 - 6,00,000 + 1,50,000 = (1,00,000). Including the 3,00,000 would give an outflow of 4,00,000, which is wrong.

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