Core concepts
- 01Cash flows classified into Operating, Investing, Financing activities.
- 02Operating: principal revenue-producing activities (sales, payments to suppliers, taxes).
- 03Investing: purchase/sale of PPE, investments, loans given.
- 04Financing: capital raising, dividends paid, borrowing repayments.
- 05Direct vs Indirect method — only difference in operating section.
Flowchart
Cash Flow Statement | Operating -- Net Profit + non-cash + WC changes | Investing -- PPE, investments (in/out) | Financing -- Equity, debt, dividend | Net Change in Cash = Opening Cash + flows
Exam-critical pointers
- ⭐Interest & dividend received: investing (general); operating (financial enterprises).
- ⭐Income tax paid usually under operating unless specifically identifiable with investing/financing.
- ⭐Non-cash transactions (bonus shares, asset swap) disclosed in notes — not in CFS.
- ⭐ICAI typically asks 16-mark indirect method sum from comparative balance sheets.
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