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CA Final · Financial Reporting · Ind AS 7 Statement of Cash Flows

Narmada Foods Ltd, a non-financial company, reports under Ind AS 7. Its profit before tax was Rs 50 lakh, after charging depreciation of Rs 6 lakh and interest expense of Rs 4 lakh, and after crediting interest income of Rs 2 lakh and dividend income of Rs 1 lakh. Working capital changes were a net outflow of Rs 5 lakh, and tax paid was Rs 9 lakh. Cash generated from operations is computed after adjusting the profit for items that belong to investing or financing and for working capital changes. What is the net cash from operating activities, treating tax paid as operating?

Net cash from operating activities is Rs 43 lakh. Start with profit before tax of 50, add depreciation 6 and interest expense 4, deduct interest and dividend income 3, deduct the working capital outflow 5, and deduct tax paid 9. Interest and dividends are shown under financing and investing.

  1. ARs 44 lakhCorrect
  2. BRs 41 lakh
  3. CRs 43 lakh
  4. DRs 47 lakh

Explanation

Profit before tax 50 plus depreciation 6 plus interest expense 4 (financing) less interest income 2 and dividend income 1 (investing) gives 57. Less working capital outflow 5 gives 52 cash generated from operations. Less tax paid 9 gives 43. Recheck: 50+6+4-3=57; 57-5=52; 52-9=43. So the correct answer is Rs 43 lakh, option 3.

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