Goodwill amortized is ......................... the profit made during the year for calculating the cash flow from operating activities.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Added to
Goodwill amortised is written off in the Statement of Profit and Loss, but no cash goes out. It is a non-cash item, so under the indirect method it is added back to the net profit to find the cash flow from operating activities.
Option (1) Deducted from — Incorrect. Items such as profit on sale of assets or an increase in current assets are deducted; a non-cash expense is added.
Option (2) Added to — Correct.
Option (3) Multiplied by — Incorrect. No adjustment multiplies the profit.
Option (4) Never included in — Incorrect. It has already been deducted in arriving at net profit, so it must be adjusted.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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