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Home Questions 9V8RHPAKPB
Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Cash Flow Statement

Question:

Identify the correct sequence to be followed while calculating net cash from operating activities from following:

(A) Calculation of cash generated from operation
(B) Adjustment for non operating/non cash charges
(C) Calculation of net profit before taxation and extraordinary items
(D) Calculation of operating profit before working capital changes

Choose the correct answer from the options given below:

Options:

(A), (B), (C), (D)

(A), (C), (B), (D)

(B), (A), (D), (C)

(C), (B), (D), (A)

Correct Answer:

(C), (B), (D), (A)

Explanation:

The correct answer is Option (4) → (C), (B), (D), (A).

(C) Calculation of net profit before taxation and extraordinary items: Start by calculating the net profit before taxes and any extraordinary items.

(B) Adjustment for non-operating/non-cash charges: Adjust for non-cash and non-operating items (like depreciation, changes in provisions, etc.) that were included in the profit calculation.

(D) Calculation of operating profit before working capital changes: Adjust the net profit to arrive at the operating profit, excluding the impact of working capital changes.

(A) Calculation of cash generated from operations: Determine the cash generated from the operating activities.

Performa of calculating cash flows from operating activities as per indirect method.

  Particulars Amount
  Net Profit/Loss before Tax and Extraordinary Items  
Add Deductions already made in Statement of Profit and Loss on account of Non-cash
items such as Depreciation, Goodwill to be Written-off.		  
Add Deductions already made in Statement of Profit and Loss on Account of
Non-operating items such as Interest.		  
Less Additions (incomes) made in Statement of Profit and Loss on Account of
Non-operating items such as Dividend received, Profit on sale of Fixed Assets.		  
  Operating Profit before Working Capital changes  
Less in case of increase in current assets (other than cash and cash equivalent) and decrease in current liabilities  
Add in case of decrease in current assets (other than cash and cash equivalent) and increase in current liabilities.  
  Cash Flows from Operation Activities before Tax and Extraordinary items  
Less Income Tax Paid  
+/– Effects of Extraordinary Items  
  Net Cash from Operating Activities  

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