The following is the position of current assets and current liabilities: 31st December, 94 31st December, 95 Debtors Rs. 30,000 Rs. 24,000 Creditors Rs. 20,000 Rs. 30,000 Stock Rs. 16,000 Rs. 20,000 Prepaid expenses Rs. 8,000 Rs. 12,000 Profit made during the year Rs. 5,00,000 after considering the following items: Depreciation on plant Rs. 20,000 Preliminary expenses written off Rs. 10,000 Transfer to general reserve Rs. 14,000 Profit on sale of land Rs. 6,000 The cash from operations is:

The correct answer is: A. Rs. 5,44,000

The cash from operations is calculated as follows:

• Net profit + Depreciation + Increase in current assets – Decrease in current liabilities

In this case, the net profit is Rs. 5,00,000. The depreciation is Rs. 20,000. The current assets increased by Rs. 8,000 (30,000 – 24,000) and the current liabilities increased by Rs. 10,000 (30,000 – 20,000). Therefore, the cash from operations is:

• 5,00,000 + 20,000 – 8,000 – 10,000 = 5,44,000

The other options are incorrect because they do not take into account all of the relevant information. For example, option B does not include the depreciation expense, and option C does not include the increase in current assets.