Determine cash from operating activities from the following information:
| 31 March 23 | 31 March 22 | |
|---|---|---|
| Inventory | ₹80,000 | ₹50,000 |
| Trade Payables | ₹40,000 | ₹30,000 |
| Goodwill | ₹1,00,000 | ₹80,000 |
| Share Capital | ₹15,00,000 | ₹10,00,000 |
| Debentures | ₹5,00,000 | ₹6,00,000 |
Profit during the year was ₹3,70,000.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → ₹3,50,000
Only changes in current assets and current liabilities adjust the profit; goodwill, share capital and debentures belong to investing and financing activities.
Profit during the year = ₹3,70,000
Less: Increase in inventory (₹80,000 − ₹50,000) = ₹30,000
Add: Increase in trade payables (₹40,000 − ₹30,000) = ₹10,000
Cash from operating activities = ₹3,70,000 − ₹30,000 + ₹10,000 = ₹3,50,000