Question

From the following information obtained from the books of 'Ajanta Ltd.', calculate Cash from Operations: Net Profit for the year ended 31st March, 2025 after charging depreciation of ₹ 80,000 and after writing off goodwill ₹ 10,500 was ₹ 4,90,000. Additional Information:

Hint:

Cash from Operations = Net Profit + Non-cash expenses + Decrease in Current Assets + Increase in Current Liabilities - Increase in Current Assets - Decrease in Current Liabilities.

Answer 1

Calculation of Cash from Operations

For the Year Ended 31st March, 2025

Particulars	Amount (₹)	Total (₹)
Net Profit for the year		4,90,000
Add: Non-operating items charged to P&L
Depreciation	80,000
Goodwill written off	10,500	90,500
Operating Profit before Working Capital Changes		5,80,500
Add: Decrease in Current Assets
Prepaid Insurance (20,000 − 15,000)	5,000
Accrued Interest (40,000 − 30,000)	10,000	15,000
Add: Increase in Current Liabilities
Rent received in advance (10,000 − 0)	10,000	10,000
Less: Increase in Current Assets
Inventories (1,50,000 − 1,00,000)	(50,000)
Trade Receivables (2,25,000 − 2,00,000)	(25,000)
Other Current Assets (1,40,000 − 90,000)	(50,000)	(1,25,000)
Less: Decrease in Current Liabilities
Trade Payables (2,00,000 − 1,70,000)	(30,000)
Outstanding Expenses (12,000 − 8,500)	(3,500)	(33,500)
Cash from Operations		4,47,000

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Working Notes

Rules for Adjustments

For Current Assets:

• Increase → Deduct (Decrease in Cash)
• Decrease → Add (Increase in Cash)

For Current Liabilities:

• Increase → Add (Increase in Cash)
• Decrease → Deduct (Decrease in Cash)

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Summary of Adjustments

Item	Nature	Treatment
Inventories (Increase)	Current Asset	Deduct
Trade Receivables (Increase)	Current Asset	Deduct
Prepaid Insurance (Decrease)	Current Asset	Add
Accrued Interest (Decrease)	Current Asset	Add
Other Current Assets (Increase)	Current Asset	Deduct
Trade Payables (Decrease)	Current Liability	Deduct
Outstanding Expenses (Decrease)	Current Liability	Deduct
Rent Received in Advance (Increase)	Current Liability	Add