Question

From the following information, calculate cash from operating activities:
$$\begin{array}{cc}& \text{Rs.}\\ \text{Proft and Loss Balance on 1st April, 2017}& 25,000\\ \text{Profit and Loss Balance on 31st March, 2018}& 80,000\\ \text{Depreciation on Fixed Assets}& 12,500\\ \text{Amortisation of Goodwill}& 8,000\\ \text{Loss on Sale of Machine}& 20,000\\ \text{Provision for Taxation}& 15,000\\ \text{Transfer to General Reserve}& 30,000\\ \text{Decrease in Trade Receivables}& 22,800\\ \text{Decrease in Trade Payables}& 4,700\\ \text{Outstanding Expenses on 1st April, 2017}& 5,000\\ \text{Outstanding Expenses on 31st March, 2018}& 6,500\\ \text{Prepaid Expenses on 1st April, 2017}& 2,000\end{array}$$

Answer 1

Calculation Of Cash From Operating Activities
for the year ended 31st March, 2018

$$\begin{array}{ccc}& \text{Amount (Rs.)}& \text{Amount (Rs.)}\\ \text{Net Profit Before Tax (Note 1)}& & 1,00,000\\ \text{Adjustments for non - cash items:}& & \\ (+)\text{Depreciation}& 12,500& \\ (+)\text{Amortisation of Goodwill}& 8,000& \\ \text{Adjustments for non - operating items:}& & \\ (+)\text{Loss on sale of machine}& \underset{–}{20,000}& \underset{–}{40,500}\\ \text{Net Profit before Working Capital Changes}& & 1,40,500\\ \text{Changes in Working Capital:}& & \\ (+)\text{Decrease in Trade Receivables}& 22,800& \\ (+)\text{Decrease in Prepaid Expenses}& 2,000& \\ (+)\text{Increase in Outstanding Expenses}& 1,500& \\ (-)\text{Decrease in Trade Payables}& \underset{–}{(4,700)}& \underset{–}{21,600}\\ \text{Cash generated from operating activities}& & 1,62,100\\ (-)\text{Tax paid}& & \underset{–}{(15,000)}\\ \text{Net Cash Flow from Operating Activities}& & \underset{–}{1,47,100}\end{array}$$
Notes: Calculation of Net Profit Before Tax:
$$\begin{array}{cc}\text{Profit and Loss Balance on 31st March, 2018}& 80,000\\ (-)\text{Profit and Loss Balance on 31st March, 2017}& \underset{–}{(25,000)}\\ & 55,000\\ (+)\text{Transfer to General Reserve}& 30,000\\ \text{Provision for tax made during the current year}& \underset{–}{15,000}\\ \text{Net Profit before tax}& \underset{–}{1,00,000}\end{array}$$
(2) It is assumed that tax paid during the year is equivalent to provision for Taxation made during the year.