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sir i have a doubt in example 7 of chapter 19 of course note. While calculation cash from from operating activities we start from profit before tax. Bad debt write off is in administrative expense. Bad debt is a non cash item expensed in statement of profit of loss. so why is it not added back in indirect method ?
Please help
It’s lost within the “movements in working capital”
If we were separately to add it back, we would need to restore it into the receivables closing figure and that would change the “movement in receivables” figure by the same amount
In addition … it is MOST improbable that you would ever be able to quantify the extent of bad debt write-offs in a set of published financial statements
Only if they were material would you be able to find the figure
OK?
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