Charles Ltd. earned a profit of ₹ 1,00,000 after charging depreciation of 20,000 on assets and a transfer to General Reserve of ₹ 30,000. Goodwill amortised was ₹ 7,000, and gain on sale of machinery was ₹ 3,000. Other information available is (changes in the value of Current Assets and Current Liabilities): trade receivables showed an increase of ₹ 3,000; trade payables an increase of ₹ 6,000; Prepaid expenses an increase of ₹ 200; and outstanding expenses a decrease of ₹ 2,000.
Ascertain Cash Flow from Operating Activities.

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Solution

Cash Flow Statement

Particulars

Amount

(₹)

Amount

(₹)

Cash Flow from Operating Activities

Profit as per Statement of Profit and Loss

1,00,000

Items to be Added:

Depreciation
20,000

Goodwill amortised
7,000

Transfer to General Reserve
30,000

Items to be Deducted:

Gain on sale of machinery
(3,000)

54,000

Operating Profit before Working Capital Adjustments

1,54,000

Less: Increase in Current Assets

Prepaid Expenses
(200)

Trade Receivables
(3,000)

Less: Decrease in Current Liabilities

Outstanding Expenses
(2,000)

Add:Increase in Current Liabilities

Trade Payables
6,000

800

Cash Generated from Operations

1,54,800

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Similar questions

Q. From the following information, calculate any two of the following ratios:

(i) Current Ratio;
(ii) Debt to Equity Ratio; and
(iii) Operating Ratio.

Revenue from Operations (Net Sales) ₹ 1,00,000; cost of Revenue from Operations (Cost of Goods Sold) was 80% of sales; Equity Share Capital ₹ 7,00,000; General Reserve ₹ 3,00,000; Operating Expenses ₹ 10,000; Quick Assets ₹ 6,00,000; 9% Debentures ₹ 5,00,000; Closing Inventory ₹ 50,000; Prepaid Expenses ₹ 10,000 and Current Liabilities ₹ 4,00,000.

Q. Revenue from Operations: Cash Sales ₹ 5,00,000; Credit Sales ₹ 6,00,000; Sales Return ₹ 1,00,000. Current Assets ₹ 3,00,000; Current Liabilities ₹ 1,00,000. Calculate Working Capital Turnover Ratio.

Q. From the following information, calculate Liquid Ratio:


Particulars	₹	Particulars	₹
Current Assets	2,00,000	Trade Receivables	1,10,000
Inventories	50,000	Current Liabilities	70,000
Prepaid Expenses	10,000

From the following information, calculation Cash Flow from Operating Activities and Investing Activities:

Particular	31st, March, 2018, (₹)	31st, March, 2019, (₹)
Surplus, i.e., Balance in Statement of Profit and Loss	2,50,000	10,00,000
Provision for Tax	75,000	75,000
Trade Payables	1,00,000	3,75,000
Current Assets (Trade Receivables and Inventories)	11,50,000	13,00,000
Fixed Assets (Tangible)	21,25,000	23,30,000
Accumulated Depreciation	10,62,500	11,00,000

Additional Information:
1. A machine having book value of ₹ 1,00,000 (Depreciation provided thereon ₹ 1,62,500) was sold at a loss of ₹ 20,000.
2. Tax paid during the year ₹ 75,000.

Q. Trade Payables ₹ 50,000, Working Capital ₹ 9,00,000, Current Liabilities ₹ 3,00,000. Calculate Current Ratio.

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Cash Flow Statement
	Particulars		Amount (₹)	Amount (₹)
	Cash Flow from Operating Activities
	Profit as per Statement of Profit and Loss			1,00,000
	Items to be Added:
	Depreciation		20,000
	Goodwill amortised		7,000
	Transfer to General Reserve		30,000
	Items to be Deducted:
	Gain on sale of machinery		(3,000)	54,000
	Operating Profit before Working Capital Adjustments			1,54,000
	Less: Increase in Current Assets
		Prepaid Expenses	(200)
		Trade Receivables	(3,000)
	Less: Decrease in Current Liabilities
	Outstanding Expenses		(2,000)
	Add:Increase in Current Liabilities
	Trade Payables		6,000	800
	Cash Generated from Operations			1,54,800