AS-3 Cash Flow Statement Classification

Accounting Standard-3 (AS-3) mandates the separate presentation of cash flows from three distinct activities in a Cash Flow Statement:

• Operating Activities: These are the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities. Examples include cash receipts from the sale of goods and services, and cash payments to suppliers and employees.
• Investing Activities: These are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Examples include cash payments to acquire property, plant, and equipment, and cash receipts from the sale of property, plant, and equipment.
• Financing Activities: These are activities that result in changes in the size and composition of the contributed equity and borrowings of the enterprise. Examples include cash proceeds from issuing shares or other securities, and cash repayments of borrowed amounts.

Activity Classification under AS-3

Based on AS-3, the activities that must be shown separately are:

• Operating Activities (b): This is a primary category required by AS-3.
• Financing Activities (c): This is another primary category required by AS-3. Cash flow from borrowing activities is a component of financing activities.
• Investing Activities (d): This is the third primary category required by AS-3.

Cash flow from borrowing activities (a) is included within financing activities and is not shown separately as a distinct main category. Cash flow from miscellaneous activities (e) is not a standard classification; such flows are allocated to operating, investing, or financing activities based on their nature.

Therefore, operating activities, financing activities, and investing activities should be shown separately.