Give 4 examples of Adjustments made in operating activities

Answer

The adjustments made in operating Activities are as follow -

1. Non cash expenses , the effect of which has already been provided in the statement of profit and loss account. ( Add back(+))

Example : Depreciation , Good will written off

2. Non operating expenses , the effect of which has already been provided in the Statement of Profit and Loss Account. ( Add back (+))

Example - Interest Expenses , Loss on sale of Fixed Assets

3. Non Operating Income , which has already been included in the computation of Net profit in the Statement of Profit and Loss Account. ( Less (-)).

Example - Dividend Income , Profit on sale of Fixed Assets.

4. Working capital changes ( Current Assets and Current liabilities)

Example -

Increase in Debtors/Trade Receivables( Less (-))

Increase in Inventory ( Less (-))

Decrease in Debtors/ Trade Receivables ( Add (+))

Increase in Creditor/Trade Payables ( Add (+))

Increase in Outstanding Payable ( Add (+))

Decrease in Creditor/ Trade Payables ( Less (-))

In case of any further queries regarding answer please drop a comment. I will surely resolve it at the earliest possible.