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It additionally provides insights into an entity’s liquidity, solvency, and skill to generate money flows. As per IND AS 7, the purpose of cash circulate statements is to offer details about an entity’s cash inflows and outflows throughout a given period. Significant restricted balances inside “cash and money equivalents”, similar to margin cash or pledged deposits, should be disclosed separately together with management commentary explaining their nature and cause for restriction per Para 48. Interest paid/received and dividends received/paid should be disclosed individually per Para 31, with consistent classification across durations. Classification depends strictly on the underlying activity’s nature, operating (core business), investing (long-term assets), or financing (equity/debt funding), not merely on asset/liability motion.

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Moreover, the repayment of financial institution overdrafts can be classified as a money inflow from financing activities. D) Financial Institution overdrafts are never included in the money circulate statement. C) Financial Institution overdrafts may be classified as cash inflows or outflows from financing actions, relying on their function.

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