Read the following passage and 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

How much amount is added to net profit to calculate the net profit before tax?

₹30,000

The correct answer is option 3- ₹30,000.

To calculate Net Profit before Tax, only appropriations of profit are added back. Transfer to General Reserve is an appropriation of profit and is therefore added back.

Depreciation and goodwill written off are operating adjustments used later while calculating cash from operating activities, not for arriving at Net Profit before Tax in this question.

So:

Net Profit = ₹1,00,000
Add: Transfer to General Reserve = ₹30,000

Net Profit before Tax = ₹1,30,000

Therefore, the amount added to net profit is ₹30,000.