Question

From the following information, calculate Cash Flow from Operating Activities and Investing Activities:

Particulars	31st March, 2026 (₹)	31st March, 2025 (₹)
Surplus, i.e., Balance in Statement of Profit & Loss	4,00,000	1,00,000
Provision for Tax	30,00,0	30,000
Trade Payables	1,50,000	40,000
Current Assets (Inventories and Trade Receivables)	5,20,000	4,60,000
Fixed Assets (Net)	3,92,000	3,25,000

Additional Information:

1. Depreciation of ₹ 80,000 was provided and a machine costing ₹ 1,05,000 (Depreciation provided thereon ₹ 65,000) was sold at a loss of ₹ 8,000.
2. Tax paid during the year ₹ 30,000.

Answer 1

Cash Flow Statement (Extract)
Particulars	Amount (₹)	Amount (₹)
I. Cash Flow from Operating Activities
Net Profit before Tax and Extraordinary Items		3,30,000
Add: Non-Cash and Non-Operating Expenses
1. Depreciation provided during the year	80,000
2. Loss on Sale of Machinery	8,000	88,000
Operating Profit before Working Capital Changes		4,18,000
Adjustments for Changes in Working Capital:
1. Add: Increase in Trade Payables \[(1,50,000 - 40,000)\]	1,10,000
2. Less: Increase in Current Assets $(5,20,000 - 4,60,000)$	(60,000)	50,000
Cash Generated from Operations		4,68,000
Less: Income Tax Paid		(30,000)
Net Cash Flow from Operating Activities		4,38,000
II. Cash Flow from Investing Activities
1. Proceeds from Sale of Machinery	32,000
2. Payment for Purchase of Fixed Assets (See Ledger)	(1,87,000)
Net Cash Used in Investing Activities		(1,55,000)

Working Notes & Ledger Accounts:

1. Calculation of Net Profit before Tax:

Net Profit as per Surplus $(4,00,000 - 1,00,000)$ = ₹ 3,00,000

Add: Provision for Tax made during the year (Note 3) = ₹ 30,000

Net Profit before Tax = ₹ 3,30,000

2. Calculation of Sale Proceeds of Machinery:

Cost of machine sold = ₹ 1,05,000

Less: Depreciation provided on it = (₹ 65,000)

Book Value of machine sold = ₹ 40,000

Less: Loss on Sale = (₹ 8,000)

Sale Proceeds (Cash Inflow) = ₹ 32,000

3. Provision for Tax Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Bank A/c (Tax Paid)	30,000	By Balance b/d (Opening)	30,000
To Balance c/d (Closing)	30,000	By Statement of P&L (Provision Made - Bal. Fig.)	30,000
Total	60,000	Total	60,000

4. Fixed Assets (Net) Account

Debit (Particulars)	Amount (₹)	Credit (Particulars)	Amount (₹)
To Balance b/d (Opening)	3,25,000	By Depreciation A/c (Charged for year)	80,000
To Bank A/c (Purchase - Balancing Figure)	1,87,000	By Bank A/c (Sale Proceeds)	32,000
		By Statement of P&L (Loss on Sale)	8,00,0
		By Balance c/d (Closing)	3,92,000
Total	5,12,000	Total	5,12,000