Question

Short Answer Question

Prepare a format of cash flow from operating activities under indirect method.

Answer 1

The format of cash flow from operating activities under Indirect method is as follows:

Indirect Method
Cash Flow from Operating Activities:
Net Profit before tax and extraordinary items				***
	Add:	Non-Cash Expenses and Non-Operating Expenses
		Depreciation	**
		Goodwill	**
		Interest paid	**
		Loss on sale of fixed assets	**
		Foreign exchange	**	**
	Less:	Non Operating Incomes.
		Dividend received	**
		Profit on sale of fixed assets	**
		Interest received	**	**
Operating profit before working capital changes				***
	Add: Decrease in Current Assets		***
		Increase in Current Liabilities	***	***
	Less: Increase in Current Assets		***
		Decrease in Current Liabilities	***	***
Cash generated from Operating Activities				***
Income tax paid				***
Cash Flow before Extraordinary Items				***
	Add/Less: Extra ordinary Items			***
Net Cash Flow from Operating Activities				***

Note: Preparation of Cash Flow Statement using Direct Method has been excluded from the prescribed syllabus. The format is given since the question has not specified the method explicitly. Students can refer to the direct method for the knowledge purpose.