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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Mehta Components Ltd reports profit before tax of Rs 18,00,000 after charging depreciation Rs 2,50,000 and interest expense Rs 1,00,000, and after crediting profit on sale of a fixed asset Rs 60,000. During the year, trade receivables increased by Rs 1,40,000, inventories decreased by Rs 80,000 and trade payables increased by Rs 50,000. Income tax paid was Rs 4,00,000. Under the indirect method, with interest paid classified as financing, what is the net cash flow from operating activities?

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  1. ARs 15,80,000Correct
  2. BRs 16,80,000
  3. CRs 16,20,000
  4. DRs 15,20,000

Explanation

Profit before tax 18,00,000 + depreciation 2,50,000 + interest 1,00,000 - profit on sale 60,000 = 21,90,000 operating profit before working capital changes. Less increase in receivables 1,40,000, add decrease in inventory 80,000, add increase in payables 50,000 = 21,80,000... check: 21,90,000 - 1,40,000 + 80,000 + 50,000 = 21,80,000. Less tax paid 4,00,000 = 17,80,000.

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