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    Question

    Use Direct method to calculate the net cash from

    operations of the company given the following transactions?ย  Sales in the year: โ‚น6,50,000ย  Cash received from customers for current year sales: โ‚น4,50,000ย  Cash received from customers for last year sales: โ‚น1,00,000ย  Cash paid to suppliers: โ‚น3,00,000ย  Cash paid for wages: โ‚น1,00,000ย  Cash paid for overheads: โ‚น50,000ย 
    A โ‚น0 Correct Answer Incorrect Answer
    B โ‚น2,50,000 Correct Answer Incorrect Answer
    C โ‚น1,00,000 Correct Answer Incorrect Answer
    D โ‚น2,00,000 Correct Answer Incorrect Answer
    E โ‚น1,50,000 Correct Answer Incorrect Answer

    Solution

    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 โ€“ Cash paid to suppliers, wages and overheads = โ‚น4,50,000 + โ‚น1,00,000 โ€“ (โ‚น3,00,000 + โ‚น1,00,000 + โ‚น50,000)ย  = โ‚น1,00,000ย 

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