Depreciation is charged in the Profit and Loss A/c but does not involve any cash outflow. Since the aim of the cash flow statement is to show only cash transactions, depreciation is added back to profit to neutralise its non-cash effect.
We add depreciation in order to find out operating profit before working capital changes :
CUET UG 2022 — Accountancy Financial Statements
2022mcqeasy
We add depreciation in order to find out operating profit before working capital changes :
Official previous-year question
Held on 20 Jul 2022 · Verified 13 Jul 2026.
Options
- A
because it is an income
- B
because depreciation is a cash expense
- C
because depreciation being a non-cash expense
- D
because it is given in operating activity proforma
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