Which items are not added to the net profit for calculating cash from…

The correct answer is Option (1) → Only (I)

Under the indirect method the net profit is adjusted for non-cash charges, for items that belong to investing or financing activities, and for appropriations made out of profit.

(I) Interest and dividend received — these are incomes from investments, an investing inflow. They are deducted from the net profit, not added, and shown under investing activities.

(II) Transfer to reserves — an appropriation of profit that involves no cash. The working starts from net profit before such transfers, so the transfer is added back (a profit of Rs. 1,00,000 after a transfer to general reserve of Rs. 30,000 becomes Rs. 1,30,000 before taxation).

(III) Discount on issue of shares — writing it off is a non-cash charge (no cash leaves the business), so it is added back.

(IV) Loss on sale of fixed assets — a loss on an investing transaction, already charged in the profit and loss; it is added back, and the sale proceeds go under investing activities.