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easyMCQCUET Accountancy 2022 20 July Shift 12026Accountancy
1 mark

We add depreciation in order to find out operating profit before working capital changes:

  1. A
    because it is an income
  2. B
    because depreciation is a cash expense
  3. C
    because depreciation being a non-cash expense
  4. D
    because it is given in operating activity proforma

Solution & Step-by-step Explanation

Depreciation is a non-cash expense that was deducted from revenues to arrive at net profit. Since no cash outflow actually occurs, it must be added back to net profit to calculate cash generated from operating activities.

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We add depreciation in order to find out operating profit before working capital changes:
A
because it is an income
B
because depreciation is a cash expense
C
because depreciation being a non-cash expense
D
because it is given in operating activity proforma

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