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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Neglience claim
in arriving at Net Cash Flow from Operating Activities there should be a deduction of the non-cash item of 200 that will have been credited in arriving at profit before taxation and
also in the section for arriving at Net Cash Flow from Operating Activities there should be a cash outflow of 200 in respect of the settlement of the obligation
For the above 2 sentences, is that means showed it as follow:
Profit before tax xxxx
Adjustment:
Add: provision for neglience claim 200
Operating Profit before working capital changes xxx
Increase/decrease in inventory
Increase/decrease in payable
Increase/decrease in receivable
Cash generated from operations
Neglience claim paid (200)
Net cash flows from operating activities xxx
Am I correct? but if I do so, it means there do not have any payment made during this year?? because the provision is made few years ago one, not current year provision. If I do so, my cash flow cannot balance ady because one add back and then one minus off so no effect on the cash flow figure.
“Add: provision for neglience claim 200”
No – it means that the figure of 200 should be DEDUCTED – it will already have been credited in arriving at profit before tax but because it’s non-cash we need to deduct it from that opening figure
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OK?
