Question

Goodwill amortised is ______ the profit made during the year for calculating the cash flow from operating activities.

Options

• added to

• deducted from

Answer 1

Goodwill amortised is added to the profit made during the year for calculating the cash flow from operating activities.

Explanation:

Goodwill amortisation is a non-cash expense. It reduces the net profit on paper but does not involve any actual outflow of cash from the business. Under the indirect method of a Cash Flow Statement, all non-cash expenses must be added back to the net profit to restore it to the actual cash position for operating activities.