While preparing Cash Flow' Statement of Sharda Ltd. ‘Depreciation provided on fixed assets’ was added to net profit to calculate cash flow from operating activities. Was the accountant correct in doing so? Give reason.

While preparing Cash Flow’ Statement of Sharda Ltd. ‘Depreciation provided on fixed assets’ was added to net profit to calculate cash flow from operating activities. Was the accountant correct in doing so? Give reason.

Post category:Accountancy
Reading time:1 mins read

SOLUTION

Yes, accountant is correct.
Reason: Depreciation is non-cash item.

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