A company reports profit of Rs. 200,000, including depreciation of Rs. 40,000. During the year, trade receivables increase by Rs. 25,000 and no other adjustments apply. What is cash generated from operating activities using the indirect method?
Correct answer: B. Rs. 175,000
- A. Rs. 135,000
- B. Rs. 175,000
- C. Rs. 215,000
- D. Rs. 265,000
Explanation
Begin with profit of Rs. 200,000 and add back non-cash depreciation of Rs. 40,000. The increase in receivables is deducted because revenue has been recognized without receiving the related cash, resulting in Rs. 215,000, not Rs. 175,000.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Financial Statements
Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
Practise Financial Statements
128 free Financial Statements MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Accounting questions like this
Accounting is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Financial Statements questions
A business makes a credit sale of Rs. 75,000 and has not yet received the cash. What is the immediate effect on the financial statements?
At year-end, rent of Rs. 24,000 has been earned by a landlord but is not yet received or recorded. What adjusting entry is required by the tenant's landlord business?
Which transaction is recorded in the statement of changes in equity?
Which financial statement reports a business's assets, liabilities and equity at a specific date?
A business has total assets of Rs. 900,000 and total liabilities of Rs. 350,000. What is the owner's equity?
At the end of the year, the Supplies account has a balance of Rs. 18,000, while unused supplies physically held are worth Rs. 5,000. What supplies expense should be recognised for the year?