If the net profits made during the year are Rs. 1,00,000 and the bills receivables have decreased by Rs. 10,000 and purchase of machinery is Rs. 2,00,000 during the year then the cash flow from operating activities will be equal to:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs. 1,10,000
Cash flow from operating activities starts from the net profit and is adjusted for the changes in current assets and current liabilities. A fall in a current asset means cash has come in, so it is added.
Net profit = Rs. 1,00,000
Add: decrease in bills receivable = Rs. 10,000
Cash flow from operating activities = Rs. 1,00,000 + Rs. 10,000 = Rs. 1,10,000
The purchase of machinery for Rs. 2,00,000 is an investing activity, so it does not enter the operating figure. Deducting the fall in bills receivable instead of adding it gives Rs. 90,000.
Note 1: It seems that there is a mistake in the original NTA paper, which prints Option (2) and Option (4) identically as Rs. 90,000, when the two options should show different figures. The question can still be solved, because Option (1) Rs. 1,10,000 is the only correct figure for the cash flow from operating activities.
Note 2: NTA picked this question from an NCERT (2026-27) exercise and changed the figures. Do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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