Read the following information to answer.
On the basis of case study given below, answer the question which follows:
"Mikku on alumni of IIT Delhi initiated his start-up "Gajanan Lid.," in the year 2016. His profit in the year 2020-21 after all appropriation was ₹6,25,000. This profit was arrived after taking the following items into consideration:
| Loss on Sale of fixed Assets | ₹5,00,000 |
| Goodwill written off | ₹3,80,000 |
| Transfer to reserve | ₹3,55,000 |
| Provision for tax | ₹2,70,000 |
| Interest on Debentures paid | ₹1,65,000 |
| Particulars | 2020(₹) | 2021(₹) |
| Prepaid Expenses | 25,000 | 10,000 |
| Accrued interest | 40,000 | 68,000 |
| Trade payables | 7,00,000 | 4,00,000 |
| Inventories | 6,50,000 | 5,50,000 |
Cash flow from Operating Activities will be:
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹18,12,000.
Profit before Tax ₹12,50,000
Add: Amortisation 3,80,000
loss on Sale 5,00,000
Interest paid 1,65,000 ₹10,45,000
Operating Profit before Working Capital = 22, 95,000
change in working capital
+ Prepaid Exp 15,000
+ Stock 1,00,000
- Accrued Int. 28,000
- Trade Payables 3,00,000 (₹2,13,000)
Cash flow from operating profit before tax = ₹20,82,000
Less: Income tax = ₹2,70,000
Net cash flow from operating activities = ₹18,12,000
*Provision for tax is paid as tax at the end of year.