Question

The following information has been extracted from the books of Ram Lal Ltd.:

Comparative Financial Data as on 31^st March, 2024 and 2023

Particulars	31.03.2024 (₹)	31.03.2023 (₹)
Surplus (P&L)	17,00,000	8,00,000
Patents	--	50,000
Sundry Debtors	5,80,000	4,20,000
Sundry Creditors	1,40,000	60,000
Cash and Cash Equivalents	2,00,000	90,000

Additional Information: Interim dividend paid during the year was \textrupee{ 1,20,000}.

Hint:

Always adjust net profit with non-cash and working capital changes for cash flow from operations.

Answer 1

Cash Flow from Operating Activities (Indirect Method) 

Net Profit before Tax and Extraordinary Items:
Increase in Surplus (P&L) = ₹17,00,000 − ₹8,00,000 = ₹9,00,000 
Add: Interim Dividend Paid = ₹1,20,000 
Total Net Profit during the year = ₹9,00,000 + ₹1,20,000 = ₹10,20,000 

Adjustments for Changes in Working Capital:
 

• Increase in Sundry Debtors = ₹5,80,000 − ₹4,20,000 = ₹1,60,000 ⇒ Outflow (−)
• Increase in Sundry Creditors = ₹1,40,000 − ₹60,000 = ₹80,000 ⇒ Inflow (+)
• Decrease in Patents = ₹50,000 − ₹0 = ₹50,000 ⇒ Non-cash item ignored
• Increase in Cash and Cash Equivalents = ₹2,00,000 − ₹90,000 = ₹1,10,000 ⇒ Result (not adjustment)

Net Change in Working Capital:
Change = (−₹1,60,000) + ₹80,000 = −₹80,000 

Net Cash from Operating Activities:
\[ \text{Net Cash from Operating Activities} = ₹10,20,000 - ₹80,000 = ₹9,40,000 \] 

Answer: ₹9,40,000