Skip to content

CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Suvarna Textiles Ltd purchased machinery for Rs 8,00,000 and paid Rs 3,00,000 in cash, the balance being settled by issuing equity shares of Rs 5,00,000 to the machinery supplier. For the Cash Flow Statement under AS 3, what amount should be shown as cash outflow from investing activities on this purchase?

The investing outflow is Rs 3,00,000. AS 3 includes only transactions involving cash or cash equivalents. The Rs 5,00,000 settled through issue of equity shares is a non-cash transaction, so it is excluded from the statement and disclosed separately in the financial statements.

  1. ARs 8,00,000
  2. BRs 5,00,000
  3. CRs 3,00,000Correct
  4. DRs 11,00,000

Explanation

Only the cash portion of the transaction affects the Cash Flow Statement. The Rs 5,00,000 settled by issuing shares is a non-cash transaction, excluded from the statement and disclosed elsewhere. Showing Rs 8,00,000 wrongly includes the non-cash part.

Did you get it right without looking?

One question tells you little. A timed set on AS 3 Cash Flow Statement shows your real accuracy, how long you take and where you lose marks.

Practise AS 3 Cash Flow StatementFree diagnostic mock

More AS 3 Cash Flow Statement questions