The following information has been extracted from the books of Ram Lal Ltd.:
Comparative Financial Data as on 31st March, 2024 and 2023
Particulars 31.03.2024 (₹) 31.03.2023 (₹) Surplus (P&L) 17,00,000 8,00,000 Patents -- 50,000 Sundry Debtors 5,80,000 4,20,000 Sundry Creditors 1,40,000 60,000 Cash and Cash Equivalents 2,00,000 90,000
Additional Information:
Interim dividend paid during the year was \textrupee{ 1,20,000}.
Comparative Financial Data as on 31st March, 2024 and 2023
| Particulars | 31.03.2024 (₹) | 31.03.2023 (₹) |
|---|---|---|
| Surplus (P&L) | 17,00,000 | 8,00,000 |
| Patents | -- | 50,000 |
| Sundry Debtors | 5,80,000 | 4,20,000 |
| Sundry Creditors | 1,40,000 | 60,000 |
| Cash and Cash Equivalents | 2,00,000 | 90,000 |
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Solution and Explanation
Cash Flow from Operating Activities (Indirect Method)
Net Profit before Tax and Extraordinary Items:
Increase in Surplus (P&L) = ₹17,00,000 − ₹8,00,000 = ₹9,00,000
Add: Interim Dividend Paid = ₹1,20,000
Total Net Profit during the year = ₹9,00,000 + ₹1,20,000 = ₹10,20,000
Adjustments for Changes in Working Capital:
- Increase in Sundry Debtors = ₹5,80,000 − ₹4,20,000 = ₹1,60,000 ⇒ Outflow (−)
- Increase in Sundry Creditors = ₹1,40,000 − ₹60,000 = ₹80,000 ⇒ Inflow (+)
- Decrease in Patents = ₹50,000 − ₹0 = ₹50,000 ⇒ Non-cash item ignored
- Increase in Cash and Cash Equivalents = ₹2,00,000 − ₹90,000 = ₹1,10,000 ⇒ Result (not adjustment)
Net Change in Working Capital:
Change = (−₹1,60,000) + ₹80,000 = −₹80,000
Net Cash from Operating Activities:
\[ \text{Net Cash from Operating Activities} = ₹10,20,000 - ₹80,000 = ₹9,40,000 \]
Answer: ₹9,40,000
Top Questions on Cash Flow Statement
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
\[ \text{Cash Flow from Operating Activities} \] \[ \begin{array}{|l|r|} \hline \textbf{Particulars} & \textbf{Rs.} \\ \hline \text{Net Profit before Adjustments} & 1,00,000 \\ \hline \text{Add: Decrease in Debtors} & 25,000 \\ \text{Add: Profit on Sale of Investment} & 4,000 \\ \hline \text{Less: Transfer to General Reserve} & (10,000) \\ \text{Less: Decrease in Bills Payable} & (20,000) \\ \text{Less: Discount on Shares Written Off} & (5,000) \\ \text{Less: Increase in Stock} & (18,000) \\ \text{Less: Loss on Sale of Machine} & (12,000) \\ \hline \text{Net Cash Flow from Operating Activities} & 64,000 \\ \hline \end{array} \]- UP Board XII - 2025
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