Question

Calculate ‘Cash from Operating Activities’ from the following Balance Sheets:

Particulars	Note No.	31.3.2023 (₹)	31.1.2022 (₹)
I. EQUITY AND LIABILITIES:
(1) Shareholders’ Funds:
(a) Share Capital		5,00,000	5,00,000
(b) Reserve and Surplus		2,00,000	1,20,000
(2) Non-Current Liabilities:
Long-term Borrowings	1	2,50,000	2,00,000
(3) Current Liabilities:
(a) Other Current Liabilities	2	-	3,000
(b) Short-Term Provision	3	75,000	70,000
TOTAL		10,25,000	8,93,000
II. ASSETS:
(1) Non-Current Assets:
(a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment		5,00,000	4,00,000
(2) Current Assets:
(a) Inventory		2,40,000	2,00,000
(b) Trade Receivables		2,00,000	1,80,000
(c) Cash and Bank Balances		70,000	90,000
(d) Other Current Assets	4	15,000	23,000
TOTAL		10,25,000	8,93,000

Working Notes:

Particulars	31.3.2023 (₹)	31.1.2022 (₹)
(1) Reserves & Surplus:	1,35,000	1,25,000
General Reserve	65,000	(5,000)
Balance in Statement of Profit & Loss	2,00,000	1,20,000
(2) Long-term Borrowings:
8% Debentures	2,50,000	2,00,000
(3) Other Current Liabilities:
Outstanding Expenses	-	3,000
(4) Short-term Provision:
Provision for Tax	75,000	70,000
(5) Other Current Assets:
Prepaid Expenses	15,000	23,000

Note: It has been assumed that new debentures have been issued on 31.3.2019. As such, interest on debentures has been calculated on ₹ 2,00,000.

Answer 1

Cash from Operating Activities
Particulars	Amount (₹)
Net Profit (from change in P&L balance)
Closing Balance of Profit & Loss (31.03.2023)	60,000
Less: Opening Balance of Profit & Loss (31.03.2022)	(5,000)
Net Profit for the year	65,000
Add: Non-Cash and Non-Operating Items
Transfer to General Reserve (1,35,000 − 1,25,000)	10,000
Provision for Tax (75,000 − 70,000)	5,000
Total Adjustments	15,000
Operating Profit before Working Capital Changes	80,000
Less: Increase in Current Assets
Inventory (2,40,000 − 2,30,000)	(10,000)
Trade Receivables (1,20,000 − 1,00,000)	(20,000)
Prepaid Expenses (15,000 − 23,000)	8,000
Less: Decrease in Current Liabilities
Other Current Liabilities (3,000 − 0)	(3,000)
Net Adjustment in Working Capital	(25,000)
Cash from Operating Activities before Interest on Debentures	55,000
Less: Interest on 8% Debentures (on ₹2,00,000 for 1 year)	(9,000)
Cash from Operating Activities	46,000