Financial Statements

Cash Flow

Easy

Rathi Udyog, made a profit of 72,000 after changing depreciation of Rs. 17,000 on fixed assets and paid Rs. 10,000 as interim dividend. The goodwill amortized was Rs. 12,000 and profit (Gain) on sale of furniture was Rs. 2,500.

The other informations were :

Trade Payable showed an increase of Rs. 7,000.

Outstanding expenses showed a decrease of Rs. 5,000.

Accrued Income showed an increase of Rs. 8,000.

Trade payable showed a decrease of Rs. 10,000.

Inventories showed a decrease of Rs. 3,000.

On the basis of above infromation answer the following questions.

We add depreciation in order to find out operating profit before working capital changes :

because it is an income

because depreciation is a cash expense

because depreciation being a non-cash expense

because it is given in operating activity proforma

✅ Correct Option: 3

Depreciation is charged in the Profit and Loss A/c but does not involve any cash outflow. Since the aim of the cash flow statement is to show only cash transactions, depreciation is added back to profit to neutralise its non-cash effect.

Question 41

If from the above informations, cash flow from operating activity is ascertained, then it is ascertained according to Accounting standard :

Question 42

In the above case study if amount of Goodwill is increasing in current year, then if will be classified in :

Question 43

Find out Net Profit before tax from the above informations :

Question 45

Apast from showing interim dividend in Net Profit before tax, where else it will be shown ?

We add depreciation in order to find out operating profit before working capital changes :

Solution

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