Question

If the amount of goodwill is ₹ 40,000 at the beginning of a year and ₹ 48,000 at the end of that year, then while preparing cash flow statement, its effect on cash flow will be:

Options

• Cash used (payment) in investing activities - ₹ 8,000

• Cash received from operating activities - ₹ 8,000

• Cash used (payment) from operating activities - ₹ 8,000

• Cash used (payment) from financial activities - ₹ 8,000

Answer 1

Cash used (payment) in investing activities - ₹ 8,000

Explanation:

Goodwill increased from ₹ 40,000 to ₹ 48,000, indicating the company acquired an additional ₹ 8,000 in goodwill. Buying goodwill is treated as an investing activity, so ₹ 8,000 is shown as a cash outflow in investing activities.