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Irrecoverable debts are charged as an expense in sopl. So it has reduced the profit figure. Then why it is not added back as a non cash expense. Can u plz explain…
It is because when we adjust the profit figure for changes in working capital, then for receivables we are taking the receivables figures in the SOFP which are after removing any irrecoverable debts. So they are effectively accounted in that adjustment 🙂
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