Read the following passage and answer the question.
A company made a profit of ₹1,00,000 after charging a Depreciation of ₹20,000 and a transfer to a General Reserve of ₹30,000. The goodwill written off of ₹7,000 and the gain on the sale of Machinery was ₹3,000.
The other information available (changes in the value of Current Assets and Current Liabilities) is as follows:
* At the end of the year Trade Receivables showed an increase of 6,000
* Trade Payables shows an increase of ₹10,000
* Prepaid Expenses show an increase of ₹200
* Outstanding Expenses show a Decrease of ₹2,000
Calculate the net cash flow from operating activities.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹1,55,800.
Profit made during the year = 1,00,000
Add: transfer to reserve = 30,000
Net profit before tax = 1,30,000
Calculation of cash flow from operating activities
| Particulars | Amount (₹) | Amount (₹) |
| Net profit before tax | 1,30,000 | |
| Adjustments for non-cash and non-operating items | ||
| Add: Dep | 20,000 | |
| Add: G/W written off | 7,000 | |
| Less: Profit on sale of machinery | 3,000 | 24,000 |
| OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES | 1,54,000 | |
| Add: increase in trade payables | 10,000 | |
| Less: Increase in trade receivables | 6,000 | |
| Less: Increase in prepaid expenses | 200 | |
| Less: Decrease in o/s expenses | 2,000 | 1,800 |
| NET CASH FLOW OPERATING ACTIVITIES | 1,55,800 |