Harsh Corporation had the following information for the year ended 31 March 2026 (all amounts in ₹ thousands): Profit before tax ₹1,80,000; Depreciation expense ₹70,000; Interest received ₹20,000; Loss on sale of machinery ₹15,000; Dividend received ₹30,000; Increase in inventories ₹60,000; Decrease in trade receivables ₹90,000; Increase in trade payables ₹80,000; Purchase of machinery (cash) ₹200,000; Proceeds from issue of share capital ₹400,000; Tax paid (cash) ₹120,000. Prepare the Cash Flow Statement using the indirect method and compute the net increase in cash and cash equivalents.

Step-by-step solution

1. Start with Profit before tax ₹180,000.
2. Add Depreciation ₹70,000 → ₹250,000.
3. Add Interest received ₹20,000 → ₹270,000.
4. Add Loss on sale ₹15,000 → ₹285,000.
5. Add Dividend received ₹30,000 → ₹315,000.
6. Adjust working capital: subtract Increase in inventories ₹60,000 → ₹255,000; add Decrease in receivables ₹90,000 → ₹345,000; add Increase in payables ₹80,000 → ₹425,000. Cash flow from operating activities = ₹425,000.
7. Cash flow from investing activities: Purchase of machinery (cash) ₹–200,000 → –₹200,000.
8. Cash flow from financing activities: Proceeds from share capital ₹400,000, Tax paid ₹–120,000 → ₹280,000.
9. Net increase in cash = ₹425,000 + (–₹200,000) + ₹280,000 = ₹505,000 (₹5,05,000).

Concept tested: Cash flow statement (indirect)

Published 24 September 2026 · How this solution was prepared and checked