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Cash Flows From Operating Activities (Indirect Method) : Net Profit/Loss Before Tax and Extraordinary Items

The document provides information to calculate cash flow from operating activities using the indirect method. It gives the net profit before tax of Rs. 42,000 and adjustments for non-cash and non-operating items like depreciation of Rs. 20,000. It also provides additional information on changes in working capital items like receivables, payables, inventory etc. to calculate the cash generated from operations of Rs. 52,500 and net cash from operating activities of Rs. 41,000 after accounting for income taxes paid.

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72 views

Cash Flows From Operating Activities (Indirect Method) : Net Profit/Loss Before Tax and Extraordinary Items

The document provides information to calculate cash flow from operating activities using the indirect method. It gives the net profit before tax of Rs. 42,000 and adjustments for non-cash and non-operating items like depreciation of Rs. 20,000. It also provides additional information on changes in working capital items like receivables, payables, inventory etc. to calculate the cash generated from operations of Rs. 52,500 and net cash from operating activities of Rs. 41,000 after accounting for income taxes paid.

Uploaded by

ALEKHYA BANERJEE
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Cash Flows from Operating Activities

(Indirect Method)
Net Profit/Loss before Tax and Extraordinary Items
xxx

+Deductions already made in Statement of Profit and Loss on account of XXX


Non-cash items such as Depreciation, Goodwill to be Written-off
+ Deductions already made in Statement of Profit and Loss on Account of Non- XXX
operating items such as Interest.
– Additions (incomes) made in Statement of Profit and Loss on Account of Non- xxx
operating items such as Dividend received, Profit on sale of Fixed Assets.
Operating Profit before Working Capital changes
+ Increase in Current liabilities XXX
+ Decrease in Current assets XXX
– Increase in Current assets XXX
– Decrease in Current Liabilities XXX
Cash Flows from Operating Activities before Tax and Extraordinary Items
– Income Tax Paid
+/– Effects of Extraordinary Items
Net Cash from Operating Activities
Illustration 1 From the following information, calculate cash flow
from operating activities using indirect method.
Statement of Profit and loss Account as of 31st March 2019
Revenue from operations 2,20,000
Other Income -
Total revenue (i+ii) 220000
Expenses
Cost of materials consumed 1,20,000
Employees benefits expenses 30,000
Depreciation 20,000
Other expenses Insurance Premium 8,000
Total Expenses 178000
Profit before Tax 42000
Less Income Tax (10000)
Profit After Tax 32000
Additional Information
Particulars April 1 2018 April 1 2019
Trade receivables 33000 36000
Trade payables 17000 15000
Inventory 22000 27000
Outstanding employees benefits 2000 3000
expenses
Prepaid insurance 5000 5500
Income tax outstanding 3000 2000
(Net Profit before Taxation and Extraordinary Items 42,000
Adjustments for-
+ Depreciation 20,000
= Operating Profit before working capital changes 62,000

– Increase in Trade Receivables (3,000)

– Increase in Inventories (5000)


– Increase in Prepaid Insurance (500)
– Decrease in Trade Payables (2000)
+ Increase in Outstanding Employees Benefits Expenses +1,000
= Cash generated from Operations 52500
– Income tax paid (11000)

= Net cash from Operating Activities 41000


Welprint Ltd. has given you the following information: (Rs)

Machinery as on April 01, 2012 50,000

Machinery as on March 31, 2013 60,000


Accumulated Depreciation on April 01, 2012 25,000

Accumulated Depreciation on March 31, 2013 15,000

During the year, a Machine costing Rs 25,000 with Accumulated Depreciation of


Rs 15,000 was sold for Rs 13,000.

Calculate cash flow from Investing Activities on the basis of the above information.
Cash Flows from Investing Activities

Particulars (Rs)

Sale of Machinery 13000

Purchase of Machinery (35000)

Net cash used in Investing Activities (22,000)


Machinery Account
Particulars Rs. Particulars Rs.
Balance B/D 50000 Cash proceeds from sale of 13000
machine)
Statement of Profit and Loss 3,000 Accumulated Depreciation 15000
(profit on sale of machine)
Cash (balancing figure: new 35000 Balance c/d 60000
machinery purchased

88000 88000
Accumulated Depreciation account
Particulars Rs. Particulars Rs.
Machinery 15000 Balance b/d 25000
Balance c/d 15,000 Statement of Profit and Loss 5000
(Depreciation provided during
the year)

30000 30000
Cash flow from Financing Activities
April 1, 2014 (Rs.) March 31, 2015 (Rs.)
Long-term Loans 200000 250000

During the year, the company repaid a loan of Rs 1,00,000.


Cash flows from Financing Activities
Proceeds from long-term borrowings 1,50,000
Repayment of long-term borrowings (1,00,000)
Net cash inflow from Financing Activities 50000
Long-Term Loan account
Particulars Rs. Particulars Rs.
Cash (Loan Repaid) 100000 Balance b/d 200000
Balance c/d 250000 Cash (New Loan Raised) 150000

350000 350000
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