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Home Questions YK6NNEVC9F
Target Exam

CUET

Subject

Accountancy

Chapter

Cash Flow Statement

Question:

READ THE FOLLOWING PASSAGE AND ANSWER THE FOLLOWING QUESTION.

The profit of a company is ₹90,000 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

How will you treat debtors while preparing the cash flow statement?

Options:

Added back to operating profit before working capital changes

Deducted from operating profit before working capital changes

Added to financing activity

Not treated

Correct Answer:

Added back to operating profit before working capital changes

Explanation:

The correct answer is option 1- Added back to operating profit before working capital changes.

Decrease in debtors by ₹20000 is added back to operating profit before working capital changes because Increase in current assets and decrease in current liabilities are to be deducted while increase in current liabilities and decrease in current assets are to be added up.

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