CA Inter Accounting: Depreciation & Cash Flow in 45 Days
A focused 45-day study plan that turns two of CA Inter's toughest accounting topics — depreciation and cash flow statements — into exam-ready strengths, with real numbers, question-solving routines, and a bridge to your first accounting job.
By the SuperAccountant Editorial Team
Why These Two Topics Keep Tripping Students Up
You have opened your CA Inter accounting textbook, stared at the depreciation schedule, then flipped ahead to the cash flow statement — and quietly closed the book. You are not alone. These two topics together account for a significant share of marks in Paper 1 (Accounting), yet most students either rush them or avoid them until the last week. That is the gap this plan closes.
Here is the good news: both topics follow a strict pattern. Once you recognise the pattern, every question becomes a variation of a template you already know. This 45-day plan builds that template, forces you to practise with real numbers, and shows you why the same skills matter when you walk into your first accounts-assistant role.
Understanding Depreciation Before You Memorise Formulas
Depreciation is simply the systematic allocation of an asset's cost over its useful life. Nothing more. The ICAI study material covers three methods you must know cold for CA Inter:
1. Straight Line Method (SLM) Annual depreciation = (Cost − Residual Value) ÷ Useful Life
Example: Machine cost ₹5,00,000. Residual value ₹50,000. Useful life 9 years. Annual depreciation = (5,00,000 − 50,000) ÷ 9 = ₹50,000 per year
2. Written Down Value Method (WDV) Depreciation = Opening WDV × Rate %
Example: Same machine, WDV rate 20%. Year 1 depreciation = 5,00,000 × 20% = ₹1,00,000 Year 2 opening WDV = 4,00,000; depreciation = ₹80,000
3. Units of Production Method Depreciation per unit = (Cost − Residual Value) ÷ Total Estimated Units
Why does the method matter in exams? Questions frequently ask you to switch methods mid-asset life, account for a change in estimate (AS 10 — Property, Plant and Equipment governs this), or calculate profit/loss on disposal. Disposal questions are the most common source of silly mistakes: always close the asset account first, then transfer to the Disposal Account.
The disposal trap: Students often forget to charge depreciation up to the date of sale in the same year. If a machine is sold on 1 October and the financial year ends 31 March, charge six months' depreciation before calculating the profit or loss on sale.
Understanding Cash Flow Statements: Indirect vs. Direct
A cash flow statement (governed by AS 3 — Cash Flow Statements) explains why the cash balance changed during the year. It splits cash movements into three activities:
- Operating — day-to-day business (collections from customers, payments to suppliers)
- Investing — buying or selling long-term assets
- Financing — borrowing, repaying loans, issuing or buying back shares
For CA Inter, you will almost always use the indirect method for operating activities. Start with net profit before tax, then adjust for non-cash items and working capital changes.
Mini-example (indirect method, operating activities):
| Item | ₹ |
|---|---|
| Net Profit Before Tax | 3,00,000 |
| Add: Depreciation (non-cash) | 50,000 |
| Add: Loss on sale of asset | 10,000 |
| Less: Profit on sale of investments | (15,000) |
| Less: Increase in Trade Receivables | (40,000) |
| Add: Increase in Trade Payables | 25,000 |
| Cash from Operations (before tax) | 3,30,000 |
| Less: Income Tax Paid | (80,000) |
| Net Cash from Operating Activities | 2,50,000 |
Notice how depreciation from the previous topic reappears here — it is added back because it reduced profit but never left the bank. This is exactly why studying these two topics together saves you time.
Your 45-Day Study Schedule
Break the 45 days into three phases. Treat each phase as a mini-sprint with a clear deliverable at the end.
Phase 1 — Concept Clarity (Days 1–15)
- Days 1–5: Read AS 10 (PPE) from the ICAI material. Solve at least 10 SLM and WDV problems daily. Focus on disposal questions.
- Days 6–10: Read AS 6 (Depreciation Accounting — still tested in CA Inter alongside AS 10). Practise change-in-estimate questions.
- Days 11–15: Read AS 3. Map every line in the standard to the indirect-method template. Solve five full cash flow statements from ICAI Study Material.
Deliverable: By Day 15 you should be able to draft a cash flow statement from a set of comparative balance sheets in under 40 minutes.
Phase 2 — Question-Solving Routine (Days 16–35)
This phase is entirely problem-based. Use ICAI past papers (available on the ICAI self-service portal) and the ICAI Practice Manual.
- Solve one depreciation question and one cash flow question every single day.
- Time yourself: depreciation questions should take 15–20 minutes; a full cash flow statement 35–45 minutes.
- After each attempt, mark your own answer before checking the solution. This forces you to identify your own error pattern.
Common error patterns to watch:
- Forgetting to adjust for dividend received (investing, unless it is a financial company)
- Including TDS deducted from interest as a financing activity instead of operating
- Double-counting — if you adjust for depreciation in operating activities, do NOT also show asset purchase net of depreciation in investing
Phase 3 — Integration and Speed (Days 36–45)
- Days 36–40: Solve combined questions (ICAI sometimes integrates depreciation schedules into cash flow questions — treat these as gifts, not traps).
- Days 41–43: Attempt two full mock papers under exam conditions.
- Days 44–45: Review only your error log. Do not read new theory.
A Quick-Reference Checklist for Exam Day
Use this before you submit your answer sheet:
- Depreciation charged from date of purchase to date of disposal (pro-rata if needed)
- Disposal account balanced; profit/loss transferred to P&L
- Change in useful life or residual value treated prospectively (AS 10 para 62)
- Cash flow statement opens with net profit before tax, not after tax
- Tax paid shown separately under operating activities
- Interest paid classified under financing (or operating if policy chosen, disclosed)
- Dividend paid under financing; dividend received under investing (non-financial entity)
- Opening and closing cash + cash equivalents reconciled at the bottom
Tick every box before moving to the next question. Students who score 90+ on these topics are not smarter — they are more systematic.
How These Skills Transfer to Your First Accounting Job
Here is something most coaching notes never tell you: the reconciling mindset you build while preparing cash flow statements is the exact same skill you use in Tally Prime or Zoho Books when a client's bank reconciliation does not match. You are asking the same question — "What caused this difference?"
Depreciation schedules are live documents in any accounts department. A company using Tally Prime maintains an asset register where every entry mirrors the journal you practise in your ICAI questions. When you join as an accounts assistant, your manager will ask you to verify the depreciation provision at year-end — and you will already know why the WDV balance looks the way it does.
If you want to see how exam concepts connect to actual accounting workflows, explore the SuperAccountant cohort programme — it walks you through real-world accounting tasks alongside your CA Inter preparation so neither feels disconnected from the other.
Mistakes That Cost Students Easy Marks
On Depreciation:
- Using the wrong base for WDV (always Opening WDV, not original cost).
- Forgetting partial-year depreciation when an asset is purchased mid-year.
- Treating revaluation surplus incorrectly — under AS 10, an increase in value is credited to Other Comprehensive Income / Revaluation Reserve, not P&L.
On Cash Flow Statements:
- Showing the purchase of a fixed asset net of proceeds from sale (both must appear gross).
- Ignoring non-cash transactions (bonus shares issued, assets acquired under finance lease) — these go in a note to the statement, not in the main body.
- Confusing "profit before tax" with "profit after tax" as the starting point.
Keeping a dedicated error log — just a notebook page with date, question source, and exact mistake — will cut your repeat errors by the time Phase 3 arrives.
Bringing It All Together
Depreciation and cash flow statements feel overwhelming until you realise they are two sides of the same coin. Depreciation reduces reported profit without touching cash; the cash flow statement adds it back to reconcile the two. Study them in parallel, practise daily with real numbers, and use the 45-day schedule as a contract with yourself rather than a wish list.
The students who clear CA Inter Accounting with comfortable marks are not working harder — they are working inside a structure. This is yours. Stick to it.
If you're not sure where to start, take SuperAccountant's free 10-minute quiz at https://app.superaccountant.in/en/quiz?utm_source=blog&utm_medium=cta&utm_campaign=students — it places you at the exact phase of our curriculum that matches your current level, so you stop revising what you already know.