READ THE FOLLOWING PASSAGE AND ANSWER THE FOLLOWING QUESTION.
The profit of a company is ₹90000 after taking into account the following items:
| Particulars | Beginning of the year (₹) | End of the year (₹) |
| Bills Receivables | 40,000 | 50,000 |
| Creditors | 30,000 | 50,000 |
| Debtors | 50,000 | 30,000 |
| * Patents written off ₹40,000 |
| * Profit on sale of fixed assets ₹10,000 |
| * Depreciation on fixed assets ₹40,000 |
| * Interest paid on debentures ₹40,000 |
Calculate net cash generated from operating activity while preparing the cash flow statement.
Answer & explanation
Correct answer: option 4
The correct answer is option 4- ₹2,30,000.
Net profit = 90,000
+ Patents written off = 40,000
- Profit on sale of asset = 10,000
+ Depreciation = 40,000
+ Interest on debentures = 40,000
TOTAL = 90,000 +40,000 - 10,000 + 40,000 + 40,000
= ₹2,00,000
+ Decrease in current assets:
Debtors = 20,000
+ Increase in current liabilities:
Creditors = 20,000
- Increase in current assets:
Bills receivables = 10,000
Net Operating profit = 2,00,000 + 20,000 + 20,000 - 10,000
= ₹2,30,000