Following is the Trading and Profit and Loss account for the year ended 31st March 2025. | Dr. | Rs. | Particulars | Cr. | Rs. | |---|---|---|---|---| | Particulars | | By sales | | 1,91,000 | | To purchases | 1,27,600 | | | | | To wages | 31,900 | | | | | To Gross profit c/d | 31,500 | | | 1,91,000 | | | 1,91,000 | | | | | To salaries | 6,600 | By Gross profit b/d | | 31,500 | | To Rent | 3,190 | By Profit on sale of building | | 25,000 | | To Depreciation | 9,570 | | | | | To Loss on sale of investments | 3,200 | | | | | To goodwill written off | 3,940 | | | | | To Net profit | 30,000 | | | | | | 56,500 | | | 56,500 | Calculate cash from operations.
Answer (1)
To calculate cash from operations, we need to follow these steps:
Start with the net profit from the Profit and Loss account : This represents the profit after all expenses have been deducted. According to the given information, the net profit is Rs. 30,000.
Add back non-cash expenses : These are expenses that do not involve cash outflow during the period, such as depreciation or amortization. From the Profit and Loss account:
Depreciation: Rs. 9,570
Goodwill written off: Rs. 3,940
Total non-cash expenses = Rs. 9,570 + Rs. 3,940 = Rs. 13,510
Adjust for gains or losses on sale of assets : These are not part of the operating activities. We subtract any gains and add back any losses:
Profit on sale of building: (subtract) Rs. 25,000
Loss on sale of investments: (add) Rs. 3,200
Calculate the cash from operations :
Start with net profit: Rs. 30,000
Add back non-cash expenses: Rs. 13,510
Subtract gains on sales: Rs. 25,000
Add back losses on sales: Rs. 3,200
Cash from Operations = 30 , 000 + 13 , 510 − 25 , 000 + 3 , 200 = 21 , 710
So, the cash from operations is Rs. 21,710. This reflects the cash generated or used by the company's core business activities during the year ending 31st March 2025.
