While preparation of Cash Flow statement,
The increase in provision for bad debts and provision for discount is added and vice versa made for decrease.
I would like to request for your explanation regarding the reason for doing so and how has this been affecting the cash inflows and outflows.
(Please reply soon too as I have exams on Monday.)
The increase in provision for irrecoverable debts (they are not called bad debts any more) and provision for discount are not cash flows. Therefore they are added back to the profit in order to get the cash generated from operations.
Have you watched my free lectures on the Statement of Cash Flows? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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