The profit of a company is ₹90000 after taking into account the following items:
| Particulars | Beginning of the year (₹) | End of the year (₹) |
| Bills Receivables | 40,000 | 50,000 |
| Creditors | 30,000 | 50,000 |
| Debtors | 50,000 | 30,000 |
| * Patents written off ₹40,000 |
| * Profit on sale of fixed assets ₹10,000 |
| * Depreciation on fixed assets ₹40,000 |
| * Interest paid on debentures ₹40,000 |
How will (Patents written off ₹40,000) be treated while preparing the cash flow statement?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Added to net profit before tax.
Writing off patents is a non-cash item. So, it is added back to profit to know the cash flow of the company.