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CA Intermediate · Advanced Accounting · AS 3 Cash Flow Statement

Sundaram Traders Ltd had opening trade receivables of Rs 6,40,000 and closing trade receivables of Rs 5,90,000. Opening trade payables were Rs 3,10,000 and closing trade payables were Rs 3,60,000. Opening inventory was Rs 4,00,000 and closing inventory Rs 4,70,000. Operating profit before working capital changes was Rs 9,00,000. What is cash generated from operations?

Cash generated from operations is Rs 9,30,000. A fall in receivables of Rs 50,000 and a rise in payables of Rs 50,000 add to cash, while the Rs 70,000 rise in inventory reduces it, giving a net increase of Rs 30,000 over Rs 9,00,000.

  1. ARs 8,30,000
  2. BRs 9,70,000Correct
  3. CRs 9,00,000
  4. DRs 9,30,000

Explanation

Decrease in receivables adds 50,000; increase in payables adds 50,000; increase in inventory deducts 70,000. Net adjustment = +30,000. So 9,00,000 + 30,000 = 9,30,000. Checking: 9,00,000+50,000+50,000-70,000 = 9,30,000.

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