Question

From the following information, prepare Cash Flow Statement from the operating activities: 

 

Items	Rs.
Net profit of current year	1,00,000
Transfer to general reserve	10,000
Decrease in debtors	25,000
Decrease in bills payable	20,000
Discount on shares written off	5,000
Increase in stock	18,000
Loss on sale of machine	12,000
Profit on sale of investment	4,000

\[ \text{Cash Flow from Operating Activities} \] \[ \begin{array}{|l|r|} \hline \textbf{Particulars} & \textbf{Rs.} \\ \hline \text{Net Profit before Adjustments} & 1,00,000 \\ \hline \text{Add: Decrease in Debtors} & 25,000 \\ \text{Add: Profit on Sale of Investment} & 4,000 \\ \hline \text{Less: Transfer to General Reserve} & (10,000) \\ \text{Less: Decrease in Bills Payable} & (20,000) \\ \text{Less: Discount on Shares Written Off} & (5,000) \\ \text{Less: Increase in Stock} & (18,000) \\ \text{Less: Loss on Sale of Machine} & (12,000) \\ \hline \text{Net Cash Flow from Operating Activities} & 64,000 \\ \hline \end{array} \]

Hint:

In the cash flow statement, adjustments for non-cash items, changes in working capital, and other operating items are made to determine the cash flow from operating activities.

Answer 1

Step 1: Understanding the Cash Flow Statement. 
A Cash Flow Statement shows the inflows and outflows of cash within an organization over a period. Operating activities involve the core operations of the business that determine the net cash from operating activities.

Step 2: Given Data.
The following adjustments are provided: 
- Net profit for the current year: Rs. 1,00,000 
- Transfer to general reserve: Rs. 10,000 (outflow) 
- Decrease in debtors: Rs. 25,000 (inflow) 
- Decrease in bills payable: Rs. 20,000 (outflow) 
- Discount on shares written off: Rs. 5,000 (outflow) 
- Increase in stock: Rs. 18,000 (outflow) 
- Loss on sale of machine: Rs. 12,000 (outflow) 
- Profit on sale of investment: Rs. 4,000 (inflow) 

Step 3: Prepare the Cash Flow Statement from Operating Activities.
\[ \text{Cash Flow from Operating Activities} \] \[ \begin{array}{|l|r|} \hline \textbf{Particulars} & \textbf{Rs.} \\ \hline \text{Net Profit before Adjustments} & 1,00,000 \\ \hline \text{Add: Decrease in Debtors} & 25,000 \\ \text{Add: Profit on Sale of Investment} & 4,000 \\ \hline \text{Less: Transfer to General Reserve} & (10,000) \\ \text{Less: Decrease in Bills Payable} & (20,000) \\ \text{Less: Discount on Shares Written Off} & (5,000) \\ \text{Less: Increase in Stock} & (18,000) \\ \text{Less: Loss on Sale of Machine} & (12,000) \\ \hline \text{Net Cash Flow from Operating Activities} & 64,000 \\ \hline \end{array} \] 
Step 4: Conclusion.
Thus, the cash flow from operating activities is Rs. 64,000, which is the final amount after considering all the adjustments.

Final Answer: \[ \boxed{\text{Net Cash Flow from Operating Activities is Rs. 64,000.}} \]