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If net profit made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during the year then the cash flow from operating activities will be:
- a)Rs. 40,000
- b)Rs. 60,000
- c)Rs. 30,000
- d)Rs. 20,000
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
If net profit made during the year are Rs. 50,000 and the bills receiv...
Calculation:
Net profit = Rs. 50,000
Decrease in bills receivables = Rs. 10,000
Explanation:
Cash flow from operating activities is a measure of the amount of cash generated or used by a company's core business operations. It indicates the cash inflows and outflows directly related to the day-to-day operations of the business.
In this scenario, the net profit made during the year is Rs. 50,000. Net profit represents the excess of revenues over expenses and is calculated using the accrual accounting method. However, net profit does not provide a clear picture of the actual cash generated by the business. To determine the cash flow from operating activities, adjustments need to be made for non-cash items and changes in working capital.
One such adjustment is the decrease in bills receivables by Rs. 10,000. When bills receivables decrease, it means that the company has collected cash from its customers, resulting in an inflow of cash. This decrease in bills receivables is an operating activity and needs to be added back to the net profit to calculate the cash flow from operating activities.
Therefore, the cash flow from operating activities can be calculated as follows:
Net profit + Decrease in bills receivables
= Rs. 50,000 + (-Rs. 10,000)
= Rs. 60,000
Hence, the correct answer is option 'B' - Rs. 60,000.
Net profit = Rs. 50,000
Decrease in bills receivables = Rs. 10,000
Explanation:
Cash flow from operating activities is a measure of the amount of cash generated or used by a company's core business operations. It indicates the cash inflows and outflows directly related to the day-to-day operations of the business.
In this scenario, the net profit made during the year is Rs. 50,000. Net profit represents the excess of revenues over expenses and is calculated using the accrual accounting method. However, net profit does not provide a clear picture of the actual cash generated by the business. To determine the cash flow from operating activities, adjustments need to be made for non-cash items and changes in working capital.
One such adjustment is the decrease in bills receivables by Rs. 10,000. When bills receivables decrease, it means that the company has collected cash from its customers, resulting in an inflow of cash. This decrease in bills receivables is an operating activity and needs to be added back to the net profit to calculate the cash flow from operating activities.
Therefore, the cash flow from operating activities can be calculated as follows:
Net profit + Decrease in bills receivables
= Rs. 50,000 + (-Rs. 10,000)
= Rs. 60,000
Hence, the correct answer is option 'B' - Rs. 60,000.
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Community Answer
If net profit made during the year are Rs. 50,000 and the bills receiv...
50000 + 10000 = Rs. 60000
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If net profit made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during the year then the cash flow from operating activities will be:a)Rs. 40,000b)Rs. 60,000c)Rs. 30,000d)Rs. 20,000Correct answer is option 'B'. Can you explain this answer?
Question Description
If net profit made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during the year then the cash flow from operating activities will be:a)Rs. 40,000b)Rs. 60,000c)Rs. 30,000d)Rs. 20,000Correct answer is option 'B'. Can you explain this answer? for Humanities/Arts 2024 is part of Humanities/Arts preparation. The Question and answers have been prepared according to the Humanities/Arts exam syllabus. Information about If net profit made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during the year then the cash flow from operating activities will be:a)Rs. 40,000b)Rs. 60,000c)Rs. 30,000d)Rs. 20,000Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for Humanities/Arts 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If net profit made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during the year then the cash flow from operating activities will be:a)Rs. 40,000b)Rs. 60,000c)Rs. 30,000d)Rs. 20,000Correct answer is option 'B'. Can you explain this answer?.
If net profit made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during the year then the cash flow from operating activities will be:a)Rs. 40,000b)Rs. 60,000c)Rs. 30,000d)Rs. 20,000Correct answer is option 'B'. Can you explain this answer? for Humanities/Arts 2024 is part of Humanities/Arts preparation. The Question and answers have been prepared according to the Humanities/Arts exam syllabus. Information about If net profit made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during the year then the cash flow from operating activities will be:a)Rs. 40,000b)Rs. 60,000c)Rs. 30,000d)Rs. 20,000Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for Humanities/Arts 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If net profit made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during the year then the cash flow from operating activities will be:a)Rs. 40,000b)Rs. 60,000c)Rs. 30,000d)Rs. 20,000Correct answer is option 'B'. Can you explain this answer?.
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