Question

From the following information obtained from the books of 'Sawera Ltd.', calculate Cash from Operations:
Net Profit for the year ended 31st March, 2025 after charging depreciation of Rs.80,000 and after writing off goodwill Rs.2,000 was Rs.5,40,000.
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Hint:

Remember the rules for working capital adjustments:
\textbf{Add:} Increase in Current Liability \& Decrease in Current Asset.
\textbf{Subtract:} Decrease in Current Liability \& Increase in Current Asset.

Answer 1

Cash Flow from Operating Activities (Indirect Method)

For the year ended 31st March, 2025

Particulars	Details (₹)	Amount (₹)
Net Profit for the year		5,40,000
Add: Non-cash and Non-operating Expenses
Depreciation	80,000
Goodwill Written Off	2,000	82,000
Operating Profit before Working Capital Changes		6,22,000
Add: Increase in Current Liabilities
Increase in Trade Payables	67,000
Add: Decrease in Current Assets
Decrease in Other Current Assets	2,300	69,300
Less: Decrease in Current Liabilities
Commission Received in Advance	(6,000)
Outstanding Rent	(10,000)	(16,000)
Less: Increase in Current Assets
Accrued Interest	(20,000)
Trade Receivables	(19,000)
Inventories	(25,000)	(64,000)
Net Decrease in Working Capital		(10,700)
Cash Flow from Operating Activities		6,11,300

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Working Notes

• Increase in Trade Payables = 1,17,000 − 50,000 = +67,000 (Add)
• Decrease in Other Current Assets = 27,000 − 24,700 = +2,300 (Add)
• Decrease in Commission Received in Advance = 10,000 − 4,000 = (6,000) (Less)
• Increase in Accrued Interest = 30,000 − 10,000 = (20,000) (Less)
• Decrease in Outstanding Rent = 20,000 − 10,000 = (10,000) (Less)
• Increase in Trade Receivables = 1,00,000 − 81,000 = (19,000) (Less)
• Increase in Inventories = 75,000 − 50,000 = (25,000) (Less)

Net Effect of Working Capital Changes:
67,000 + 2,300 − 6,000 − 20,000 − 10,000 − 19,000 − 25,000 = (10,700)

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Final Answer

The Net Cash Flow from Operating Activities for the year ended 31st March, 2025 is ₹6,11,300.