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Fourteenth Edition : February 2026
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CHAPTER
TYPE OF ACTIVITIES
Que. 1. From the following data, identify the nature of activities as per Ind AS 7.
S.No. Nature of transaction
1. Cash paid to employees
2.Cash paid for development of property costs
3.Borrowings repaid
4.Cash paid to suppliers
5.Loan to Director
6.Bonus shares issued
7.Dividends paid
8.Cash received from trade receivables
9.Proceeds from sale of PPE
10.Depreciation of PPE
11.Advance received from customers
12.Purchased goodwill
13.Payment of promissory notes [RTP May 2021]
Ans.
S.No. Nature of transaction
Activity as per Ind AS 7
1. Cash paid to employees Operating activity
2.Cash paid for development costs Investing activity
3.Borrowings repaid Financing activity
4.Cash paid to suppliers Operating activity
5.Loan to Director Investing activity
S. No.Nature of transactionActivity as per Ind AS 7
6.Bonus shares issuedNon-cash item
7.Dividends paidFinancing activity
8.Cash received from trade receivablesOperating activity
9.Proceeds from sale of PPEInvesting activity
10.Depreciation of PPENon-cash item
11.Advance received from customersOperating activity
12.Purchased goodwillInvesting activity
13.Payment of promissory notesFinancing activity
FOREIGN CURRENCY CASH FLOWS
Que. 2. Z Ltd. has no foreign currency cash flow for the year 2017. It holds some deposit in a bank in the USA. The balances as on 31.12.2017 and 31.12.2018 were US$ 100,000 and US$ 102,000 respectively. The exchange rate on December 31, 2017 was US$1 = ` 45. The same on 31.12.2018 was US$1 = ` 50.
The increase in the balance was on account of interest credited on 31.12.2018. Thus, the deposit was reported at ` 45,00,000 in the balance sheet as on December 31, 2017. It was reported at ` 51,00,000 in the balance sheet as on 31.12.2018.
How these transactions should be presented in cash flow for the year ended 31.12.2018 as per Ind AS 7? [RTP May 2019]
Ans.:
Particulars
Profit and Loss Account
Cash Flow Statement
Notes to Cash Flow Statement
Remarks
The Profit and Loss account is credited by :
(a) ` 1,00,000 (US$ 2000 × ` 50) towards interest income.
(b) The exchange difference of US$ 100,000 × (` 50 - ` 45) i.e. ` 500,000.
In preparing the cash flow statement, ` 500,000, the exchange difference, should be deducted from the ‘Net profit before taxes, and extraordinary item’.
In order to reconcile the opening balance of the cash and cash equivalents with its closing balance, the exchange difference ` 500,000, should be added to the opening balance in note to cash flow statement.
Note : Cash flows arising from transactions in a foreign currency shall be recorded in Z Ltd.’s functional currency by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the date of the cash flow.
INTEREST AND DIVIDENDS
Que. 3. [Based on Para No. 36]
During the financial year 20X1-20X2, Akola Limited have paid various taxes & reproduced the below mentioned records for your perusal:
Capital gain tax of ` 20 crore on sale of office premises at a sale consideration of ` 100 crore.
Income Tax of ` 3 crore on Business profits amounting ` 30 crore (assume entire business profit as cash profit).
Dividend Distribution Tax of ` 2 crore on payment of dividend amounting ` 20 crore to its shareholders.
Income tax Refund of ` 1.5 crore (Refund on taxes paid in earlier periods for business profits).
You need to determine the net cash flow from operating activities, investing activities and financing activities of Akola Limited as per relevant Ind AS.
[RTP November 2020; MTP March 2021]
Ans. : Para 36 of Ind AS 7 inter alia states that when it is practicable to identify the tax cash flow with an individual transaction that gives rise to cash flows that are classified as investing or financing activities the tax cash flow is classified as an investing or financing activity as appropriate. When tax cash flows are allocated over more than one class of activity, the total amount of taxes paid is disclosed.
Accordingly, the transactions are analyzed as follows:
Que. 4. [Based on Para No. 36]
During the financial year 2019-2020, Akola Limited have paid various taxes & reproduced the below mentioned records for your perusal:
Capital gain tax of ` 20 crores on sale of office premises at a sale consideration of ` 100 crores.
Income Tax of ` 3 crores on Business profits amounting ` 30 crores (assume entire business profit as cash profit).
Dividend Distribution Tax of ` 2 crores on payment of dividend amounting ` 20 crores to its shareholders.
Income tax Refund of ` 1.5 crore (Refund on taxes paid in earlier periods for business profits).
You need to determine the net cash flow from operating activities, investing activities and financing activities of Akola Limited as per relevant Ind AS. [RTP November 2020]
Ans. : Analysis Transaction wise:
Capital Gain Tax(20)Investing Activity Business profits30Operating Activity Tax on Business profits(3)Operating Activity
Dividend Payment(20)Financing Activity
Dividend Distribution Tax(2)Financing Activity
INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
Que. 5. [Based on Para Nos. 39, 42 and 42A]
Company A acquires 70% of the equity stake in Company B on July 20, 20X1. The consideration paid for this transaction is as below:
(a) Cash consideration of ` 15,00,000
(b) 200,000 equity shares having face of ` 10 and fair value of ` 15 per share.
On the date of acquisition, Company B has cash and cash equivalent balance of ` 2,50,000 in its books of account.
On October 10, 20X2, Company A further acquires 10% stake in Company B for cash consideration of ` 8,00,000.
Advise how the above transactions will be disclosed/presented in the statement of cash flows as per Ind AS 7. [RTP May 2018]
Ans. : Analysis and Conclusion : For the financial year ended March 31, 20X2 total consideration of ` 15,00,000 less ` 250,000 will be shown under investing activities as “Acquisition of the subsidiary (net of cash acquired)”.
There will not be any impact of issuance of equity shares as consideration in the cash flow statement however a proper disclosure shall be given elsewhere in the financial statements in a way that provides all the relevant information about the issuance of equity shares for non-cash consideration.
Further, in the statement of cash flows for the year ended March 31, 20X3, cash consideration paid for the acquisition of additional 10% stake in Company B will be shown under financing activities.
COMPREHENSIVE PRACTICAL QUESTIONS : [BASED ON IND AS - 7]
Que. 6. In the year 2020-2021, one land was sold for ` 5 crore and another land purchased for ` 3 crore by XYZ Limited. Company reported Cash Flow on a Net Basis in Cash Flow Statement i.e. ` 2 crore in Investing Activity as Cash receipt from Sale of Land.
Advise whether treatment given as above is correct or not as per the provisions of Ind AS 7.
Also, calculate the cash from operations by indirect method from the following information: Operating Statement of XYZ Limited for the year ended 31st March, 2021
Balance Sheet as on 31st March
2021 Examination - 6 Marks]
Ans. :
(i) Treatment of cash flow:
If nothing is specifically mentioned, then as per Ind AS 7, the cash flows will be presented on gross basis. Gross basis means the receipts would be shown separately and the payments will be shown separately.
Accordingly, in the year 2020-2021, while presenting the information, entity will show separately cash outflow from investing activity of ` 3 crore for purchase of land and cash inflow from investing activity of ` 5 crore from sale of land.
(ii) Cash flow from Operations by Indirect Method:
Particulars ` Decrease in inventory4,000 Increase in trade receivables(12,000)
in trade payables16,000
in expenses payables 12,000
Generated from Operations (CGO)4,00,000
paid (1,20,000)
cash generated from operating activity2,80,000
Que. 7. Z Ltd. (India) has an overseas branch in USA. It has a bank account having balance of USD 7,000 as on 1st April 2019. During the financial year 2019-2020, Z Ltd. acquired computers for its USA office for USD 280 which was paid on same date. There is no other transaction reported in USA or India.
Exchange rates between INR and USD during the financial year 20192020 were:
Date USD 1 to INR
1st April 2019 70.00
30th November 2019 71.00 (Date of purchase of computer)
31st March 2020 71.50
Average for 2019-2020 70.50
Please prepare the extract of Cash Flow Statement for the year ended 31st March 2020 as per the relevant Ind AS and also show the foreign exchange profitability from these transactions for the financial year 2019-2020? [January 2021 Examination - 5 Marks]
Ans. : Statement of Cash Flows for the year ended 31st March 2020
Particulars ` `
Cash flows from operating activities
Net Profit (Refer Working Note)10,360
Adjustments for non-cash items: Foreign Exchange Gain(10,360)
Net cash outflow from operating activities0 Cash flows from investing activities
Acquisition of Property, Plant and Equipment(19,880)
Net cash outflow from Investing activities(19,880)
Cash flows from financing activities 0
Net change in cash and cash equivalents(19,880)
Non-current liabilities
Long-term borrowings
Other non-current liabilities
Total non-current liabilities
Current liabilities
Financial liabilities
Trade payables
Bank Overdraft
Other
Total
Additional Information :
1. Profit after tax for the year ended 31st March, 20X2 - ` 4,450 lacs
2. Interim Dividend paid during the year - ` 450 lacs
3. Depreciation and amortization charged in the statement of profit and loss during the current year are as under :
(a) Property, Plant and Equipment - ` 500 lacs
(b) Intangible Assets - ` 20 lacs
4. During the year ended 31st March, 20X2 two machineries were sold for ` 10 lacs. The carrying amount of these machineries as on 31st March, 20X2 is ` 60 lacs.
5. Income taxes paid during the year ` 105 lacs
Using the above information of Kuber Limited, construct a statement of cash flows under indirect method.
Other non-current/current assets and liabilities are related to operations of Kuber Ltd. and do not contain any element of financing and investing activities. [RTP November 2019]
Ans. : Statement of Cash Flows
Particulars ` in lacs
Cash flows from Operating Activities : Net Profit after Tax4,450
Add : Tax Paid105 4,555
Add : Depreciation & Amortization (500 + 20) 520
Less : Gain on Sale of Machine (70 - 60)(10)
Less : Increase in Deferred Tax Asset (855 - 750) (105) 4,960
Change in operating assets and liabilities
Add : Decrease in financial asset (170 - 145)25
Less : Increase in other non-current asset (800 - 770)(30)
Less : Increase in other current asset (195 - 85) (110)
Less : Decrease in other non-current liabilities (3,615 - 2,740)(875)
Add : Increase in other current liabilities (300 - 200) 100
Add : Increase in trade payables (150 - 90)60 4,130
Less : Income Tax(105)
Cash generated from Operating Activities4,025
Cash flows from Investing Activities :
Sale of Machinery70
Purchase of Machinery [13,000 - (12,500 - 500-60)](1,060)
Purchase of Intangible Asset [50 - (30 - 20)](40)
Sale of Financial asset - Investment (2,500 - 2,300)200
Cash outflow from Investing Activities(830)
Cash flows from Financing Activities : Dividend Paid(450)
Long term borrowings paid (5,000 - 2,000)(3,000)
Cash outflow from Financing Activities(3,450)
Net Cash outflow from all the activities(255)
Opening cash and cash equivalents (460 - 60) 400
Closing cash and cash equivalents (220 - 75)145
Financial Reporting (FR) | CRACKER
AUTHOR : Parveen Sharma, Kapileshwar Bhalla
PUBLISHER : Taxmann
DATE OF PUBLICATION : February 2026
EDITION : 14th Edition
ISBN NO : 9789375618539
No. of Pages : 828
BINDING TYPE : Paperback
Rs. 795
DESCRIPTION
Financial Reporting – CRACKER (Previous Exams Solved Papers) is a focused, examintelligence manual for CA Final – Group I | Paper 1, designed to decode ICAI’s testing approach under Ind AS and enable marks-oriented preparation. Rather than serving as a conventional question bank, the book analyses how ICAI examines Financial Reporting— standard-wise, paragraph-wise, and attempt-wise—highlighting scoring patterns, examiner preferences, and expectations for answer presentation. This Edition includes fully solved questions up to the January 2026 CA Final examination, covering practical, theory, and integrated case-based questions, and mirrors ICAI’s suggested-answer format, making it both a revision tool and an answer-writing guide.
The Present Publication is the 14th Edition, authored by CA. Parveen Sharma & CA. Kapileshwar Bhalla, with the following noteworthy features:
• [Exhaustive Solved Past Examination Questions] Covers ICAI-asked questions across multiple attempts with complete, exam-compliant suggested answers
• [Ind AS-wise & Para-wise Question Mapping] Questions are arranged sub-topic-wise and mapped to specific paragraphs of the relevant Ind AS
• [Chapter-wise Marks Distribution & Trend Analysis] Analytical tables highlight frequently tested chapters and high-weightage Ind AS
• [ICAI RTP & MTP Question Integration] Includes selected, exam-relevant questions from ICAI’s RTPs and MTPs
• [ICAI Study Material Cross-linkage] Chapter-wise correlation with ICAI Study Material to align preparation with source material