When preparing a Cash Flow Statement under the Indirect Method as per AS 3 or Ind AS 7, how should a decrease in the balance of Inventories and an increase in the balance of Trade Payables be treated while calculating Cash Flow from Operating Activities?

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General Studies · Financial Accounting

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Both the decrease in Inventories and the increase in Trade Payables should be added to the Net Profit before tax and extraordinary items.

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Answer 1

Both the decrease in Inventories and the increase in Trade Payables should be subtracted from the Net Profit before tax and extraordinary items.

Answer 2

The decrease in Inventories should be added to the Net Profit, while the increase in Trade Payables should be subtracted from it.

Answer 3

Both the decrease in Inventories and the increase in Trade Payables should be added to the Net Profit before tax and extraordinary items.

Answer 4

The decrease in Inventories should be ignored as it is a non-cash item, whereas the increase in Trade Payables should be added.

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