The company arrived at a net income of ₹5,00,000 at the year-end. Depreciation for the year was ₹2,00,000. There was a profit of ₹50,000 on assets sold which was transferred to the Statement of Profit and Loss account. Trade Receivables increased during the year is ₹40,000 and Trade Payables also increased by ₹60,000. Compute the cash flow from operating activities.
Answer & explanation
Correct answer: option 4
The correct answer is option 4- ₹6,70,000.
| Particulars | Amount | Final amount | |
| Profit at the year end | ₹5,00,000 | ||
| Add | depreciation | ₹2,00,000 | ₹7,00,000 |
| Less | Profit on sale of asset | ₹50,000 | ₹6,50,000 |
| Less | Increase in trade receivables | ₹40,000 | ₹6,10,000 |
| Add | Increase in trade payables | ₹60,000 | ₹6,70,000 |
Thus, Cash flow from operating activity is ₹670000.