PDF · Cash Flow Statement
Cash Flow Statement (AS 3) Notes for CA Inter Advanced Accounting
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- ca.notesverse
- Course
- CA Inter
- Subject
- Advanced Accounting
- Added
- 11 Nov 2026
Part of: CA InterAdv Accounting
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These notes explain the cash flow statement under AS 3 for CA Inter students. They cover what counts as cash and cash equivalents, which transactions are not treated as cash flows, and the classification of cash inflows and outflows. The notes also include a list of common examples and the steps used to prepare the statement, with a start on computing net cash flow from operating activities under the direct method. They suit students revising the chapter for CA Inter Advanced Accounting who want a compact, example-based summary.
What the notes cover
The notes begin with the definition and purpose of the cash flow statement and then explain cash and cash equivalents, such as short-term highly liquid investments with a maturity of about three months or less. They separate transactions that are not cash flows, like deposits and withdrawals between cash and bank, and explain why a change in cash balance due to exchange rate restatement is not a cash flow. A table lists typical cash inflows and outflows, with notes on income tax, insurance claims and the treatment of financial companies.
How to use them for revision
Read the definitions and the inflow and outflow table first, then work through the six steps of preparing the statement in order. The direct method computation of operating cash flow is shown in a structured format that can be copied into answer practice. Revisiting the list of non-cash transactions, such as bonus shares and conversion of debt to equity, helps avoid common mistakes in exam questions on this topic.
Who should read these
These notes are useful for CA Inter students preparing Advanced Accounting and anyone who needs a clear reference on AS 3 classification rules. The preview shows the first four pages of a longer set, and the full note in the Studycaller app includes the remaining pages on the cash flow computation.
Key topics in these notes
- Cash and cash equivalents
- Transactions not considered as cash flows
- Cash inflows and outflows
- Classification under operating investing and financing activities
- Treatment of income tax in cash flows
- Non-cash transactions
- Steps in preparing cash flow statement
- Direct method for operating cash flow
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Frequently asked questions
What is a cash equivalent under AS 3?
A cash equivalent is a short-term, highly liquid investment with a maturity of about 3 months or less from acquisition, subject to an insignificant risk of change in value. Investments in shares are normally not taken as cash equivalents.
Is a bank deposit or withdrawal a cash flow?
No. Movements between cash and cash equivalents, such as depositing cash into a bank or withdrawing from it, are not considered cash flows.
Which items are non-cash transactions excluded from the cash flow statement?
Examples given include acquiring an asset on credit or by exchange, converting debt to equity, and issuing bonus shares.
What are the steps to prepare a cash flow statement?
The notes list six steps: compute operating, investing and financing cash flows, find the net increase or decrease, then add the opening balance to get the closing cash and cash equivalents.
How can I get the full notes?
Open it free in the Studycaller app.