Comprehension Passage
Charles Ltd., made a profit of Rs. 1,00,000 after charging depreciation of Rs. 20,000 on assets and a transfer to general reserve of Rs. 30,000. The goodwill amortised was Rs. 7,000 and gain on sale of machinery was Rs. 3,000.
Other information available to you (changes in the value of current assets and current liabilities) are:
- Trade receivables showed an increase of Rs. 3,000,
- Trade payables an increase of Rs. 6,000,
- Prepaid expenses an increase of Rs. 200,
- Outstanding expenses a decrease of Rs. 2,000.
Ascertain cash flow from operating activities.
Additional Information:
| Particulars | March 31, 2017 (Rs.) | March 31, 2016 (Rs.) |
|---|---|---|
| Trade Receivables | 20,00,000 | 40,00,000 |
| Trade Payables | 20,00,000 | 10,00,000 |
| Other Expenses payable (administrative) | 10,000 | 20,000 |
| Prepaid Administrative Expenses | 10,000 | 10,000 |
| Outstanding Trading Expenses | 20,000 | 40,000 |
| Advance Trading Expenses | 20,000 | 40,000 |
| Provision for Taxation | 10,00,000 | 12,00,000 |
When calculating cash flow from operating activities, how would the transfer to the general reserve of Rs. 30,000 affect the cash flow?
1
Transfer to general reserve is added to the cash flow
2
Transfer to general reserve is deducted from the cash flow
3
Transfer to general reserve has no impact on the cash flow
4
Transfer to general reserve is treated as a financing activity