need help ST of cash flows

nabutt
nabutt Registered Posts: 86 Regular contributor ⭐
in AAT Level 4 (Level 8 in Scotland)
i was doing some questions from my revision book n in sum questions they did add/sub the gain/loss on disposal from profit from operations and in some they didnt ..... am bit confuse here can sumone help meee plzzzz


thANKSS

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  • sdv
    sdv Registered Posts: 585 Epic contributor 🐘
    nabutt wrote: »
    i was doing some questions from my revision book n in sum questions they did add/sub the gain/loss on disposal from profit from operations and in some they didnt ..... am bit confuse here can sumone help meee plzzzz


    thANKSS

    Profit or Loss is not a cash (cash affecting) transactions.

    When preparing a Statement of cash flow, one would start at net profits from operations.(PBTI)

    To arrive at PBIT profits are added to it / Losses are deducted from it.

    But because these are non-cash items you need to adjust PBIT by deducting profits and adding back any losses.

    Remember the profit/loss will be taken into account later on the statement of cash flow when the proceeds from sales is added and Purchases are deducted.

    The same applied with the depreciation figure. - Add back the depreciation to PBTI.

    Hope this helps

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