From the following information calculate cash flow from operating acti...
Calculation of Cash Flow from Operating Activities
Bills Receivable:
- Decrease in bills receivable: 10000 - 7500 = 2500
Debtor:
- Decrease in debtor: 62500 - 37500 = 25000
Stock:
- Increase in stock: 30000 - 25000 = 5000
Prepaid Expenses:
- Decrease in prepaid expenses: 10000 - 7500 = 2500
Accrued Income:
- Increase in accrued income: 7500 - 5000 = 2500
Creditors:
- Increase in creditors: 27500 - 25000 = 2500
Outstanding Expenses:
- Increase in outstanding expenses: 1500 - 1250 = 250
Bills Payable:
- Decrease in bills payable: 10000 - 7500 = 2500
Income Received in Advance:
- Increase in income received in advance: 1500 - 1250 = 250
Profit During the Year:
- Profit during the year: 150000
Total Cash Flow from Operating Activities:
- Cash flow from operating activities = (Decrease in bills receivable + Decrease in debtor + Increase in stock + Decrease in prepaid expenses + Increase in accrued income + Increase in outstanding expenses + Decrease in bills payable + Increase in income received in advance + Profit during the year)
- Cash flow from operating activities = (2500 + 25000 + 5000 + 2500 + 2500 + 250 - 2500 + 250 + 150000)
- Cash flow from operating activities = 181,750
Explanation:
Cash flow from operating activities is calculated by adjusting the net income for non-cash items and changes in working capital. In this case, we have calculated the cash flow from operating activities by using the information given about various working capital items such as bills receivable, debtors, stock, prepaid expenses, accrued income, creditors, outstanding expenses, bills payable and income received in advance.
We have also been given the profit during the year, which is included in the calculation of cash flow from operating activities. By taking into account the changes in various working capital items and adjusting for non-cash items, we have arrived at the total cash flow from operating activities of 181,750.