CAF-1 · Chapter 14 · Question 4 of 15
When using the indirect method to calculate cash generated from operations, how is a 'Gain on disposal of equipment' treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It is deducted from profit before tax.
Explanation
A gain on disposal is included in the profit before tax figure but relates to an investing activity. Therefore, it is deducted from profit before tax in the operating section to avoid double counting.
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