CUET CUET Accountancy 2024 - Identify the correct sequence of the following steps involved in calculating cash flows from operating activities of a company: | PYQs + Solutions

CUET Accountancy 2024

Accountancy

Cash Flow Statement

Easy

Identify the correct sequence of the following steps involved in calculating cash flows from operating activities of a company:

(E), (C), (D), (A), (B)

(E), (A), (D), (B), (C)

(E), (A), (B), (C), (D)

(A), (B), (C), (D), (E)

Correct Option: 3

To calculate cash flows from operating activities, we follow these steps:

1. Start with Goodwill amortised (E) - this is a non-cash expense that needs to be added back.

2. Next, calculate Operating profit before working capital changes (A) - this shows profit before considering changes in working capital.

3. Then, we find Cash generated from operations (B) - this is the cash available from operating activities.

4. After that, we account for Income tax paid (C) - this is the cash outflow for taxes.

5. Finally, we arrive at Net cash flow from operating activities (D) - this is the total cash flow from operations after all adjustments.

So, the correct sequence is: (E) → (A) → (B) → (C) → (D).

This is why option 3 is correct.