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CMA Intermediate · Corporate Accounting and Auditing · Cash Flow Statement

Sagar Ltd's profit before tax was ₹8,00,000 after charging depreciation ₹1,50,000, a provision for doubtful debts ₹30,000, and an unrealised foreign exchange loss ₹20,000 on a foreign currency payable, and after crediting share of undistributed profit of an associate ₹60,000 and a gain on sale of investments ₹90,000. Inventories decreased by ₹70,000 and trade payables decreased by ₹45,000. Cash generated from operations before tax is:

Cash generated from operations is ₹8,75,000. Add back depreciation, the provision and the unrealised exchange loss, deduct the associate's undistributed profit and the investing gain on sale of investments, then add the inventory decrease and deduct the payables decrease.

  1. A₹8,75,000Correct
  2. B₹8,15,000
  3. C₹9,35,000
  4. D₹7,85,000

Explanation

Start 8,00,000; add depreciation 1,50,000, provision 30,000, unrealised loss 20,000 = 10,00,000. Deduct associate undistributed profit 60,000 and gain on sale of investments 90,000 = 8,50,000. Add inventory decrease 70,000 = 9,20,000; deduct payables decrease 45,000 = 8,75,000. Option B wrongly treats the associate profit as cash-neutral and omits its deduction.

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