Question

From the following information, calculate ‘Cash from operating activities’:

	₹
Profit & Loss Balance on 1-4-2022 (Debit)	12,000
Profit & Loss Balance on 31-3-2023 (Credit)	60,000
Writing off Preliminary Expenses	10,000
Transfer to General Reserve	40,000
Transfer to Provision for Doubtful Debts	6,000
Increase in Trade Receivables	32,000
Trade Payables on 1-4-2022	60,000
Trade Payables on 31-3-2023	52,000
Prepaid Expenses on 1-4-2022	7,500
Prepaid Expenses on 31-3-2023	5,000
Outstanding Expenses on 1-4-2022	4,000

Answer 1

Cash Flow from Operating Activities
Particulars	Amount (₹)
Net Profit (P&L balance increased: 60,000 + 12,000)	72,000
Adjustments for non-cash and non-operating items:
Add:
Writing off Preliminary Expenses	10,000
Transfer to General Reserve	40,000
Transfer to Provision for Doubtful Debts	6,000
Operating Profit before W.C. Changes	1,28,000
Adjustments for Working Capital Changes:
Less:
Increase in Trade Receivables	(32,000)
Decrease in Trade Payables (60,000 − 52,000)	(8,000)
Add:
Decrease in Prepaid Expenses (7,500 − 5,000)	2,500
Increase in Outstanding Expenses (4,000 assumed as closing)	4,000
Net Adjustment	(33,500)
Net Cash from Operating Activities	86,500