Read the following passage ans answer the question.

A company made a profit of ₹1,00,000 after charging a Depreciation of ₹20,000 and a transfer to a General Reserve of ₹30,000. The goodwill written off of ₹7,000 and the gain on the sale of Machinery was ₹3,000.
The other information available (changes in the value of Current Assets and Current Liabilities) is as follows:
* At the end of the year Trade Receivables showed an increase of 6,000
* Trade Payables shows an increase of ₹10,000
* Prepaid Expenses show an increase of ₹200
* Outstanding Expenses show a Decrease of ₹2,000

What is the operating profit before working capital changes?

₹1,54,000

The correct answer is option 2- ₹1,54,000.

Profit made during the year = 1,00,000
Add: transfer to reserve      = 30,000
Net profit before tax          = 1,30,000

Profit after charging items = ₹1,00,000

Add back non-cash and non-operating charges:

• Depreciation = +₹20,000

• Goodwill written off = +₹7,000

Add back appropriations (since they are not operating expenses):

• Transfer to General Reserve = +₹30,000

Less non-operating income:

• Gain on sale of machinery = −₹3,000

Calculation: ₹1,00,000 + 20,000 + 7,000 + 30,000 - 3,000 =  ₹1,54,000

Changes in current assets and current liabilities are working capital changes, so they are not considered at this stage.