CBSE Class 12 Commerce: Cash Flow Statement — Important Questions with Answers 2026

Key Concepts & Short Answer Questions

• Q: What is a Cash Flow Statement? What are its three activities?
  Ans: A Cash Flow Statement shows the inflows and outflows of cash during an accounting period. Three activities: (1) Operating Activities: Cash from core business operations (sales, expenses, working capital changes). (2) Investing Activities: Cash from purchase/sale of fixed assets, investments. (3) Financing Activities: Cash from issue/repayment of share capital, debentures, loans, dividends. Format: Start with net profit, adjust for non-cash items, working capital changes, then investing and financing sections.
• Q: How is cash flow from operating activities calculated using the indirect method?
  Ans: Start with Net Profit before tax. Add back: Depreciation, goodwill written off, loss on sale of asset, interest paid. Subtract: Profit on sale of asset, interest/dividend received. = Operating profit before working capital changes. Adjust for: Increase in current assets (subtract), Decrease in current assets (add), Increase in current liabilities (add), Decrease in current liabilities (subtract). = Cash generated from operations. Subtract: Tax paid. = Net cash from operating activities.

Long Answer / Application Questions

• Q: From the following, calculate cash flow from investing activities: Machinery purchased ₹2,00,000, old machine sold for ₹30,000, investments purchased ₹50,000, dividend received ₹10,000.
  Ans: Cash Flow from Investing Activities: Purchase of machinery: (₹2,00,000). Sale of old machine: ₹30,000. Purchase of investments: (₹50,000). Dividend received: ₹10,000. Net Cash used in Investing Activities: (₹2,10,000). Note: Parentheses indicate cash outflow.

Exam Tips

• Write structured answers with headings and points for Cash Flow Statement
• Use real-world examples wherever possible — examiners reward application
• For numerical problems, show all steps and calculations clearly