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.
Net profit = ₹10,000
Add: depreciation of ₹2,000
Add: transfer to General Reserve ₹3,000
Add: Written off Goodwill ₹700
Less: Profit on sale of Asset ₹300
Operating profit before working capital changes = (10,000 +2,000+3,000+700-300) = 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 flow from operating activities = (15,400 -300 +600 -20-200)
= 15,480