Question

Following is the position of Current Assets and Current Liabilities of X Ltd.:

	31.3.2023 (₹)	31.3.2022 (₹)
Creditors	85,000	70,000
Debtors	1,40,000	2,00,000
Bills Receivable	15,000	10,000
Short-term loans	20,000	-
Provision for bad debts	7,000	10,000
Bank Overdraft	50,000	40,000
Goodwill	1,20,000	1,50,000

The company incurred a loss of ₹ 37,000 during the year. Calculate ‘Cash from operating activities.’

Hints:

1. Short-term loan and Bank overdraft will be treated as a financing activity.
2. Increase in Goodwill is treated as purchase of Goodwill. Hence, it will not affect ‘Cash from operating activities’. It will be shown as an Investing Activity while preparing Cash Flow Statement.

Answer 1

Cash Flow from Operating Activities for the year ending 31st March, 2023.
Particulars	Amount (₹)
Net Loss during the year	(37,000)
Add: Non-Cash/Non-Operating Items
Provision for Bad Debts decrease (10,000 – 7,000) (no add-back)
(Only the increase will be added back.)
Operating Profit before Working Capital Changes	(37,000)
Changes in Working Capital:
Add:
Increase in Creditors (85,000 – 70,000)	15,000
Decrease in Debtors (2,00,000 – 1,40,000)	60,000
Less: Increase in Bills Receivable (15,000 – 10,000)	(5,000)
Net Working Capital Adjustment	70,000
Net Cash from Operating Activities	33,000

Note: Short-term loans, bank overdrafts, and goodwill changes are not considered here; they are financing and investing activities.