Question
Use Direct method to calculate the net cash from
operations of the company given the following transactions? Sales in the year: ₹6,50,000 Cash received from customers for current year sales: ₹4,50,000 Cash received from customers for last year sales: ₹1,00,000 Cash paid to suppliers: ₹3,00,000 Cash paid for wages: ₹1,00,000 Cash paid for overheads: ₹50,000Solution
The direct method for a cash flow statement details cash inflows and outflows from operating activities by listing actual cash receipts and payments, such as cash from customers and payments to suppliers. It considers actual cash, irrespective of the year it relates to. Net Cash = Total cash received from customers – Cash paid to suppliers, wages and overheads = ₹4,50,000 + ₹1,00,000 – (₹3,00,000 + ₹1,00,000 + ₹50,000) = ₹1,00,000
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