Using the indirect method, profit is Rs. 150,000, depreciation is Rs. 20,000, trade receivables increase by Rs. 10,000, inventory decreases by Rs. 8,000 and trade payables decrease by Rs. 5,000. What is cash generated from operating activities?
Correct answer: B. Rs. 163,000
- A. Rs. 153,000
- B. Rs. 163,000
- C. Rs. 173,000
- D. Rs. 183,000
Explanation
Begin with profit of Rs. 150,000 and add depreciation of Rs. 20,000. Subtract the receivables increase of Rs. 10,000, add the inventory decrease of Rs. 8,000, and subtract the payable decrease of Rs. 5,000, producing Rs. 163,000.
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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.
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