When calculating Cash Flow from Operating Activities using the indirect method, we start with net profit and adjust for changes in current assets and liabilities.
Given:
- Net Profit = Rs. 50,000
- Bills Receivable decreased by Rs. 10,000
Bills Receivable is a current asset. When it decreases during the year, it means bills have been collected and converted into cash. This represents a cash inflow.
Adjustment Rule:
Decrease in Current Assets → Add to Net Profit
Calculation:
Cash Flow from Operating Activities = Net Profit + Decrease in Bills Receivable
= Rs. 50,000 + Rs. 10,000
= Rs. 60,000
The decrease in bills receivable indicates that cash has been realized from debtors, which increases the cash available from operations beyond the net profit figure.
Answer: Option 1 - Rs. 60,000