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    Question

    While preparing a Cash Flow Statement using the Indirect

    method as required under AS 3, which of the following will not be deducted from/added to the Net Profit to arrive at the “Cash flow from Operating activities”?
    A Interest income Correct Answer Incorrect Answer
    B Gain on sale of inventory Correct Answer Incorrect Answer
    C Gain on sale of a fixed asset Correct Answer Incorrect Answer
    D Depreciation Correct Answer Incorrect Answer

    Solution

    Explanation: Gain on sale of inventory is included in the normal course of operations , so it is already part of operating profit. The other items are non-operating and need adjustment.

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