Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Cash Flow Statement

Question:

If net profit is ₹35,000 after writing off goodwill ₹6,000 and loss on sale of computer ₹2,000, cash flow from operating activities will be:

Options:

₹35,000

₹37,000

₹41,000

₹43,000

Correct Answer:

₹43,000

Explanation:

The correct answer is option 4- ₹43,000.

To calculate cash flow from operating activities using the indirect method, we have to start with net profit and then adjust for non-cash expenses and losses. In this case, we have to add back the goodwill write-off and the loss on the sale of a computer to the net profit.

Net Profit = ₹35,000
Goodwill Write-off = ₹6,000  (non cash expense)
Loss on Sale of Computer = ₹2,000
Cash Flow from Operating Activities = Net Profit + Non-Cash Expenses + loss
                                                            = ₹35,000 + ₹6,000 + ₹2,000
                                                            = ₹43,000