Question

Calculate Cash from Operations from the following: Net Profit for the year is ₹10,000 after providing for depreciation of ₹2,000; Trade Creditors decreased by ₹15,000; Outstanding Expenses increased by ₹3,000.

Hint:

Rules:

Add non-cash expenses (depreciation)
Increase in liabilities → add
Decrease in liabilities → subtract

Answer 1

Concept: Cash from Operations is calculated by adjusting net profit for:

Non-cash expenses (add back)
Changes in working capital

Step 1: Start with Net Profit. \[ \text{Net Profit} = ₹10{,}000 \]
Step 2: Add non-cash expenses. Depreciation is a non-cash expense → add back. \[ 10{,}000 + 2{,}000 = ₹12{,}000 \]
Step 3: Adjust working capital changes. (i) Trade Creditors decreased by ₹15,000 Decrease in creditors = cash paid → subtract. \[ 12{,}000 - 15{,}000 = -₹3{,}000 \] (ii) Outstanding Expenses increased by ₹3,000 Increase in outstanding expenses = expense not paid → add. \[ -3{,}000 + 3{,}000 = ₹0 \] Final Answer: \[ \boxed{\text{Cash from Operations} = ₹0} \]