CA Inter P1 · Chapter 2 · Question 3 of 12
Case: Extracts for Nandi Agro Ltd for the year are: net profit before tax ₹8,40,000; depreciation ₹1,20,000; profit on sale of machinery ₹30,000; increase in trade receivables ₹75,000; decrease in inventories ₹40,000; increase in trade payables ₹25,000; income tax paid ₹2,10,000. Using the indirect method under AS 3, the net cash from operating activities is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) ₹7,10,000
Explanation
Start with profit before tax 8,40,000, add back depreciation 1,20,000 and deduct the non-operating profit on sale of machinery 30,000 = 9,30,000. Working capital: less increase in receivables 75,000, add decrease in inventories 40,000, add increase in payables 25,000 = 9,20,000. Less income tax paid 2,10,000 gives ₹7,10,000.
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