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Question

Are proposed dividend and provision for tax short term provisions? Are these considered as long term provision for preparing Cash Flow? What is the effect of them being considered as short term provision on Cash Flow?

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Solution

Dear Student,

Proposed dividend and provision for tax are short term provisions as liability against these provision is likely to arise within 12 months from the date of Balance Sheet.
These are added to the current years profit in the operating activity.

Hope this answers your query.
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