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Question
For the year ending 31st March, 2025, Gavi Ltd. made a profit of ₹ 8,00,000 after charging depreciation of ₹ 50,000 on fixed assets and transferring ₹ 1,15,000 to the general reserve.
Goodwill written off during the year was ₹ 75,000. During the year, the company sold machinery of the book value of ₹ 2,00,000 at a gain of ₹ 30,000. During the year, the trade receivables decreased by ₹ 20,000 and trade payables increased by ₹ 25,000. Prepaid expenses decreased by ₹ 1,000, and outstanding rent increased by ₹ 5,000.
Calculate Cash flows from operating activities.
Ledger
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Solution
| Cash Flows from Operating Activities | ||
| Particulars | Details (₹) | Amount (₹) |
| Net Profit after Reserve | 8,00,000 | |
| Add: Transfer to General Reserve | 1,15,000 | |
| Net Profit before Tax and Extraordinary Items | 9,15,000 | |
| Adjustments for Non-Cash and Non-Operating Items: | ||
| Add: Depreciation on Fixed Assets | 50,000 | |
| Add: Goodwill written off | 75,000 | |
| Less: Gain on sale of Machinery | (30,000) | 95,000 |
| Operating Profit before Working Capital Changes | 10,10,000 | |
| Adjustments for Changes in Working Capital: | ||
| Add: Decrease in Trade Receivables (Current Asset) | 20,000 | |
| Add: Increase in Trade Payables (Current Liability) | 25,000 | |
| Add: Decrease in Prepaid Expenses (Current Asset) | 1,000 | |
| Add: Increase in Outstanding Rent (Current Liability) | 5,000 | 51,000 |
| Net Cash Flow from Operating Activities | 10,61,000 | |
shaalaa.com
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