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From the following extracts of a company’s Balance Sheets, and the additional information, you are required to calculate Cash from Operating Activities for the year ending 31st March, 2021. - Accounts

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Ledger

From the following extracts of a company’s Balance Sheets, and the additional information, you are required to calculate Cash from Operating Activities for the year ending 31st March, 2021.

Anjan Ltd. reported a profit of ₹ 80,000 for the year ended 31st March, 2021, after considering the following:

Particulars (₹)
(i) Tax provided during the year 4,000
(ii) Amortization of Patents 10,000
(iii) Profit on sale of Vehicle 3,000
(iv) Writing off Preliminary expenses 2,000
During the year, machinery costing ₹ 40,000 (accumulated
depreciation thereon being ₹ 18,000) was sold for ₹ 6,000.

 

  31.03.2021 (₹) 31.03.2020 (₹)
Trade Receivable 20,000 16,000
Inventory 12,000 15,000
Cash at Bank 8,000 10,000
Trade Payable 9,000 11,000
Marketable Securities 5,000 2,000
Plant & Machinery 88,000 1,30,000
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Solution

Cash Flow from Operating Activities  
Net Profit (After Tax)   80,000
Add: Provision for Tax   4,000
Net Profit Before Tax   84,000
Add: Non-cash items and non-operating expenses  
Preliminary expenses written off: 2,000 46,000
Amortisation of patents: 10,000
Depreciation: 18,000
Loss on sale of Machinery: 16,000
    1,30,000
Less: Non-operating incomes   (3000)
Profit on sale of vehicle    
Operating profit before changes in working capital   1,27,000
Less: Increase in Trade Receivable   (4,000)
Add: Decrease in Inventory   3,000
Less: Decrease in Trade Payable   (2,000)
Net Cash Flow from Operating Activities   1,24,000

Working Notes:

(1) Tax provided during the year will be added to Net Profit (After Tax) to derive Net Profit Before Tax.

(2) Change in the balance of plant and machinery will be considered in Cash Flow from Investing Activities.

(3)

Machinery cost: ₹ 40,000
(-) Accumulated depreciation (18,000)
Book value 22,000
(-) Sale value (6,000)
Loss on sale 16,000
Concept: Calculation of Net Cash Flows from Operating Activities Based on Indirect Method
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