Question

The profit of Philips Ltd. after appropriations was Rs. 2,50,000. This profit arrived at after taking into consideration the following items:
$$\begin{array}{ccc}\text{S. No.}& \text{Particulars}& \text{Amount}\\ 1.& \text{Depreciation on Fixed Tangible Assets (Machinery)}& 20,000\\ 2.& \text{Loss on Sale of Fixed Tangible Assets (Furniture)}& 2,000\\ 3.& \text{Goodwill written off}& 9,000\\ 4.& \text{Provision for Taxation}& 35,000\\ 5.& \text{Transfer to General Reserve}& 17,500\\ 6.& \text{Gain on Sale fo Fixed Tangible Assets (Machinery)}& 8,000\end{array}$$

Additional Information:

$$\begin{array}{ccc}\text{Particulars}& \text{31-03-2016}& \text{31-02-2017}\\ & & \\ \text{Trade Receivables (All good)}& 50,000& 62,000\\ \text{Trade Payables}& 45,000& 55,000\\ \text{Inventory}& 12,000& 8,000\\ \text{Income Received in Advance}& 8,000& -\\ \text{Outstanding Expenses}& 6,000& 3,000\\ \text{Prepaid Expenses}& -& 5,000\\ & & \end{array}$$

Answer 1

Calculation of Cash Flow from Operating Activities:
for the year ended 31st March, 2017


$$\begin{array}{cccc}& \text{Particulars}& & \text{Amount (Rs.)}\\ & \text{Net Profit before Tax (2,50,000 + 35,000 + 17,500)}& & 3,02,500\\ & \text{Adjustment for non-cash items:}& & \\ & (+)\text{Depreciation on Fixed Tangible Assets}& 20,000& \\ & (+)\text{Loss on sale of fixed Tangible assets}& 2,000& \\ & (+)\text{Goodwill written off}& \text{9,000}& \\ & (-)\text{Gain on Sale of Machinery}& \underset{–}{(8,000)}& \underset{–}{(23,000)}\\ & \text{Net Profit before Working Capital Changes}& & 3,25,500\\ & \text{Changes in Working Capital:}& & \\ & (+)\text{Decrease in Inventory}& 4,000& \\ & (+)\text{Increase in Trade Payables}& \text{10,000}& \\ & (-)\text{Increase in Trade Receivables}& (12,000)& \\ & (-)\text{Increase in Prepaid Expenses}& (5,000)& \\ & (-)\text{Decrease in Outstanding Expenses}& (3,000)& \\ & (-)\text{Decrease in Income Received in Advance}& \underset{–}{(8,000)}& \underset{–}{(14,000)}\\ & \text{Cash Generated from Operating Activities}& & 3,11,500\\ & (-)\text{Tax Paid}& & \underset{–}{(35,000)}\\ & \text{Net Cash Flow from Operating Activities}& & 2,76,500\end{array}$$