AS 3 (Indian GAAP) and Ind AS 7 prescribe the Cash Flow Statement structure: Operating, Investing, and Financing activities with the indirect method (most common in India). CORAA composes the statement from Balance Sheet movement plus P&L non-cash adjustments. The closing cash balance derived must reconcile to the Cash and Bank line on the Balance Sheet; CORAA enforces this tie-out.
Two paths to the same audit conclusion. One leaves traces; the other doesn't.
Profit Before Tax adjusted for non-cash items (depreciation, amortization, finance cost, loss/gain on PPE disposal). Then working capital change: increase in receivables (use of cash), increase in payables (source of cash), inventory movement. Operating tax paid subtracted.
Purchase of fixed assets (use of cash), sale of fixed assets (source), purchase and sale of investments. Interest and dividend received.
Proceeds from borrowings (source), repayment of borrowings (use), proceeds from share issue, dividends paid, finance cost paid.
Starts with Profit Before Tax from the P&L. Adds back non-cash items, adjusts for working capital change, deducts tax paid, arrives at Net Cash from Operating Activities.
Net change in cash equals: Operating + Investing + Financing. This must equal the BS movement in Cash and Bank between opening and closing. CORAA refuses to mark the Cash Flow 'ready' if the tie-out fails.
Increase in Trade Receivables = use of cash; decrease = source. Same for Inventory. Increase in Trade Payables = source; decrease = use. CORAA derives each from BS movement.
Every CF line drills to the constituent ledger movement. The auditor sees what feeds the line, can verify against the underlying ledger, and adjusts the classification if needed.
