Accountancy Part BCash Flow Statement

C Ltd made a profit of ₹10,000 after charging depreciation of ₹2,000…

C Ltd made a profit of ₹10,000 after charging depreciation of ₹2,000 on Assets, transfer to General Reserve ₹3,000. Written off Goodwill ₹700, Profit on sale of Asset ₹300, increase in Debtors ₹300, increase in creditors ₹600, increase in prepaid expenses ₹20 and decrease in outstanding expenses ₹200.

What will be the cash from operating activities?

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → ₹15,480

Under the indirect method, the profit is first brought back to operating profit before working capital changes, then adjusted for the changes in current assets and current liabilities.

Net profit = ₹10,000
Add: Depreciation = ₹2,000
Add: Transfer to General Reserve = ₹3,000
Add: Goodwill written off = ₹700
Less: Profit on sale of asset = ₹300
Operating profit before working capital changes = ₹15,400

Less: Increase in debtors = ₹300
Add: Increase in creditors = ₹600
Less: Increase in prepaid expenses = ₹20
Less: Decrease in outstanding expenses = ₹200
Cash from operating activities = ₹15,480

The figures are one-tenth of those in the NCERT illustration below.

NCERT (2026-27 edition):
Ascertaining Cash Flow from Operating Activities – “Charles Ltd.,made a profit of Rs. 1,00,000 after charging depreciation of Rs. 20,000 on assets and a transfer to general reserve of Rs. 30,000. The goodwill amortised was Rs. 7,000 and gain on sale of machinery was Rs. 3,000. Other information available to you (changes in the value of current assets and current liabilities) are trade receivables showed an increase of Rs. 3,000; trade payables an increase of Rs. 6,000; prepaid expenses an increase of Rs. 200; and outstanding expenses a decrease of Rs. 2,000. Ascertain cash flow from operating activities.”