A company’s Cash Flow Statement for the year ended 31 March 2026 (all amounts in ₹ thousands) is prepared using the indirect method. The following data is available: Profit before tax 1,500; Depreciation 200; Interest received 30; Loss on sale of equipment 25; Dividend received 20; Increase in inventories 120; Decrease in trade receivables 90; Increase in trade payables 80; Purchase of equipment (cash) 350; Proceeds from issue of share capital 600; Tax paid (cash) 200. Prepare the Cash Flow Statement and compute the net increase in cash and cash equivalents.

Step-by-step solution

1. Start with Profit before tax: ₹1,500.
2. Add Depreciation (non‑cash): +₹200 → ₹1,700.
3. Add Interest received: +₹30 → ₹1,730.
4. Add Loss on sale of equipment: +₹25 → ₹1,755.
5. Subtract Dividend received: –₹20 → ₹1,735.
6. Adjust working capital: Increase inventories (cash outflow) –₹120 → ₹1,615.
7. Decrease trade receivables (cash inflow) +₹90 → ₹1,705.
8. Increase trade payables (cash inflow) +₹80 → ₹1,785 (Cash from operating activities).
9. Investing activities: Purchase of equipment ₹350 (cash outflow).
10. Financing activities: Proceeds from share capital ₹600 (cash inflow).
11. Net increase in cash = ₹1,785 – ₹350 + ₹600 = ₹2,035.

Concept tested: Preparing Cash Flow Statement using indirect method

Published 26 September 2026 · How this solution was prepared and checked