Cash Flow Explained: Working Capital & Non-Current Items

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This discussion clarifies a common query about cash flow statements, specifically regarding the inclusion of non-current items in working capital movements. The expert explains that only cash inflows and outflows are considered for cash flow, and non-cash items are typically excluded. While working capital changes are primarily based on current assets and liabilities, the context of how non-current transactions might indirectly affect cash needs is sometimes considered.

Helper

Helper (Querist)
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30 April 2020 Dear Expert,

Please solve my doubt :
while preparing the cash flow - in movement in working capital-why we taking even non current item

c.bakshi

c.bakshi (Expert)
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02 May 2020 we will take non current items only when cash and cash equivalent got effected by such transaction. e.g. investment sold and receipt of which credited in bank then it would form part in investing activities and profit or loss form part of operating activities. i hope you cleared

Helper

Helper (Querist)
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02 May 2020 Dear,
My question is why in movement in working capital (increase -decrease of current asset and current liability) we are taking difference of non current item also.

Since working capital changes is purely based on current asset so only current item should come

c.bakshi

c.bakshi (Expert)
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02 May 2020 i have never seen such practice that while calculating changes in working capital non current assets/liabilities taken into consideration might be there is a mistake.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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08 May 2020 Only cash inward and outward taken into account for preparing cash flow statement. It is not in anyway affected by Non Cash Items. Non Cash items are taken into Fund Flow Statement Only.

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