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CMA Intermediate · Corporate Accounting and Auditing · Cash Flow Statement

Under the indirect method, net cash flow from operating activities is found by adjusting profit or loss for certain effects. Which of the following is NOT one of the adjustments listed in Ind AS 7?

Proceeds from issue of share capital are not an adjustment to profit under the indirect method. They are a financing cash inflow shown in financing activities. The adjustments to profit are working capital changes, non-cash items, and items whose cash effects are investing or financing flows.

  1. AChanges during the period in inventories and operating receivables and payables
  2. BNon-cash items such as depreciation, provisions and deferred taxes
  3. CItems whose cash effects are investing or financing cash flows
  4. DProceeds from issue of share capital during the periodCorrect

Explanation

Ind AS 7 lists three adjustments: changes in inventories and operating receivables and payables, non-cash items, and other items whose cash effects are investing or financing flows. Share issue proceeds are a financing cash inflow reported separately, not an adjustment to arrive at operating cash flow.

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