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Why the decrease movement should be deducted? The point says the movement has been included in COS. I think 2400 should be added back the same as deprn.
An increase in provision is an expense and debited in the income statement. While preparing a cash flow statement, this will be added back, same as depreciation.
Whereas, decrease in provision is credited in the income statement. It adds to the profit. This should be deducted while preparing cash flow statement, as it is a non-cash item.Hi Najiya, thanks for explanation. But if an increase in provision is an expense, but the point says it has been included in COS? I still cant understand the point means what. If not being included in COS, what we should do?
costs like depreciation, amortization, loss in disposal of plants, waste material costs,…. are added to COS. if not, they would explicitly mention in the question.
its like:
profit before tax
adjustment for:
depreciation/amortisation
profit on disposal
interest for the year
provision
incease/decrease:
trade receivables
inventory
provision <---when is it included here??? because i am consfused. or you can include it where you like?increase / decrease in provision is calculated in operating cash flow. in that list, order is not matter. classification should be correct.
some exceptions
dividend paid can be under the either heading of operating or financing.
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