Accountancy Part BCash Flow Statement

Cash from operations will be ifTotal sales Rs. 5,00,000Credit sales R…

Cash from operations will be if

Total sales Rs. 5,00,000
Credit sales Rs. 2,25,000
Total Purchases Rs. 2,48,000
Credit Purchases Rs. 1,08,000
Cash Operating expenses Rs. 40,000

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Rs. 95,000

Under the direct method only cash receipts and cash payments count, so the credit parts of sales and purchases are taken out first.

Cash sales = Rs. 5,00,000 − Rs. 2,25,000 = Rs. 2,75,000
Cash purchases = Rs. 2,48,000 − Rs. 1,08,000 = Rs. 1,40,000
Cash from operations = Rs. 2,75,000 − Rs. 1,40,000 − Rs. 40,000
Cash from operations = Rs. 95,000

NCERT (2026-27 edition):
Ascertaining Cash Flow from Operating Activities – “… As per AS-3, an enterprise should report cash flows from operating activities either by using : Direct method whereby major classes of gross cash receipts and gross cash payments are disclosed; or Indirect method whereby net profit or loss is duly adjusted for the effects of (1) transactions of a non-cash nature, (2) any deferrals or accruals of past/future operating cash receipts, and (3) items of income or expenses associated with investing or financing cash flows.”