Question

Following information is related to Mercury Ltd.:

STATEMENT OF PROFIT & LOSS for the year ended 31st March, 2026
Particulars	Note No.	₹
I. Revenue from Operations (Net Sales)		30,00,000
II. Other Income	1	45,000
III. Total Revenue (I + II)		30,45,000
IV. Expenses:
(a) Purchases of Stock-in-Trade		23,03,000
(b) Change in Inventories of Stock-in-Trade	2	(16,000)
(c) Depreciation and Amortisation Expenses		1,85,000
(d) Other Expenses	3	3,29,000
Total Expenses		28,01,000
V. Profit before Tax (III - IV)		2,44,000
VI. Less: Provision for Tax		64,000
VII. Profit after Tax (V - VI)		1,80,000

Notes to Accounts

Particulars	₹
1. Other Income
(a) Dividend Received	5,000
(b) Gain (Profit) on Sale of Plant	40,000
	45,000
2. Change in Inventories of Stock-in-Trade
Opening Inventories	2,84,000
Less: Closing Inventories	3,00,000
	(16,000)
3. Other Expenses
(a) Office Expenses	58,000
(b) Selling Expenses	2,35,000
(c) Loss on Sale of Assets	36,000
	3,29,000

Other Information:

Particulars	Balance as on 31st March, 2026 (₹)	Balance as on 31st March, 2025 (₹)
Trade Payables	2,78,000	2,50,000
Trade Receivables	4,52,000	4,15,000
Office Expenses Outstanding	...	5,00,000
Selling Expenses Outstanding	25,000	22,000

Calculate Cash Flow from Operating Activities.

Answer 1

Cash Flow from Operating Activities

Particulars	Amount (₹)	Amount (₹)
Profit before Tax (as per Statement of Profit & Loss)		2,44,000
Add: Non-Cash and Non-Operating Expenses
1. Depreciation and Amortisation Expenses	1,85,000
2. Loss on Sale of Assets	36,000	2,21,000
Less: Non-Operating Incomes
1. Dividend Received	(5,000)
2. Gain (Profit) on Sale of Plant	(40,000)	(45,000)
Operating Profit before Working Capital Changes		4,20,000
Adjustments for Changes in Working Capital:
Add: Increase in Current Liabilities & Decrease in Current Assets
1. Increase in Trade Payables \[(2,78,000 - 2,50,000)\]	28,000
2. Increase in Selling Expenses Outstanding $(25,000 - 22,000)$	3,000
Less: Decrease in Current Liabilities & Increase in Current Assets
3. Increase in Inventories $(3,00,000 - 2,84,000)$	(16,000)
4. Increase in Trade Receivables $(4,52,000 - 4,15,000)$	(37,000)
5. Decrease in Office Expenses Outstanding $(0 - 5,000)$	(5,000)	(27,000)
Cash Generated from Operations		3,93,000
Less: Income Tax Paid (Assumed equal to provision made)		(64,000)
Cash Flow from Operating Activities		3,29,000