Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Cash Flow Statement

Question:

Read the following information to answer.
On the basis of case study given below, answer the question which follows:
"Mikku on alumni of IIT Delhi initiated his start-up "Gajanan Lid.," in the year 2016. His profit in the year 2020-21 after all appropriation was ₹625000. This profit was arrived after taking the following items into consideration:

Loss on Sale of fixed Assets ₹500000
Goodwill written off ₹380000
Transfer to reserve ₹355000
Provision for tax ₹270000
Interest on Debentures paid ₹165000
Particulars 2020(₹) 2021(₹)
Prepaid Expenses 25000 10000
Accrued interest 40000 68000
Trade payables 700000 400000
Inventories 650000 550000



Operating Profit before working capital changes will be:

Options:

₹2295000

₹2095000

₹2395000

₹1295000

Correct Answer:

₹2295000

Explanation:

Profit after all appropriations    =625000
Add: transfer to reserve           = 355000
        provision for tax                = 270000
Profit before tax                      1250000
Add: Amortisation   380000
        loss on Sale   500000
        Int . paid       165000                        ₹1045000
Operating Profit before Working Capital   = 22, 95,000