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Cash Flow – Cash Operating activity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Cash Flow – Cash Operating activity

  • This topic has 1 reply, 2 voices, and was last updated 11 years ago by John Moffat.
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  • December 10, 2013 at 9:53 pm #152278
    gabbi08
    Member
    • Topics: 135
    • Replies: 181
    • ☆☆☆

    Hello

    Could you please help me to undestand why the PROFIT ON SALE is added in the indirect method and decucted in the direct method?

    Thanks
    Gabbi

    December 12, 2013 at 9:52 am #152682
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54759
    • ☆☆☆☆☆

    Profit on sale is not added in the indirect method.

    In the indirect method, when calculating the cash flow from operating activities, we start with the profit and adjust it to get a ‘cash profit’. Any profit on sale of a non-current asset will have been included in the profit, but is not a cash flow, and therefore it is deducted from the profit to get the cash flow.

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