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  • In the accounting treatment of Provision of tax, provision made for tax will be added to net profits before tax.
  • For calculating cash from operations after tax, amount paid for tax will be deducted from it.
  • Proposed Dividend appearing in the previous year’s Balance Sheetis paid during the year and is shown under the head‘cash flow from financing activities.’
  • The balance appearing in the current year’s Balance Sheet is added back to net profits and is shown under the heading ‘cash flow from operating activities.’
  • Dividend or Interim Dividend paid during the year is added to Net Profits for computing ‘Cash Flow from OperatingActivities’ and appears under‘Cash Flow from Financing Activities’.
  • There is no need of preparing ‘Proposed Dividend Account.’
  • To identify whether there is an inflow or outflow of cash on account of fixed assets and investments, fixed account and accumulated depreciation account is prepared.
  • Profit/loss on sale of fixed assets will be added/ subtracted to/ from the net profits in order to find out cash flow from operating activities, as it is a non-operating cost.
  • Share Capital account is prepared to compute fresh issue of equity shares, any premium or discount on issue or buy back of equity shares.
  • Debenture account is preparedlike any other Liability Account and it helps to compute the debentures issued during the period.

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