Cave Ltd. made a profit of ₹1,50,000 after charging deprecation of ₹30,000 on assets and a transfer to general reserve of ₹30,000. The Goodwill amortised was ₹9,000 and gain on sale of machinery was ₹5,000. Operating profit before working capital changes will be :
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹2,14,000
To find operating profit before working capital changes, start from the profit and add back non-cash and non-operating charges (depreciation, amortisation, transfer to reserve), then deduct non-operating gains.
Net profit for the year = ₹1,50,000
Add: Depreciation = ₹30,000
Add: Transfer to general reserve = ₹30,000
Add: Goodwill amortised = ₹9,000
Less: Gain on sale of machinery = ₹5,000
Operating profit before working capital changes = ₹1,50,000 + ₹30,000 + ₹30,000 + ₹9,000 − ₹5,000 = ₹2,14,000
₹2,19,000 adds the gain instead of deducting it; the gain belongs to investing activities.
NCERT (2026-27 edition):
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