Question : Which of the following statement is incorrect?
Option 1: Loss on sale of fixed assets is added back and profit on sale of fixed assets is deducted from net profit while arriving at the cash flow from operating activities
Option 2: Depreciation is added back to net profit while calculating cash flows from operating activities
Option 3: Depreciation increase the value of net profit without reducing the cash balance as it is a non- cash item
Option 4: None of the above
Correct Answer: None of the above
Solution : Answer = None of the above
Loss on the sale of fixed assets is added back, depreciation is added back to net profit, and it doesn't reduce cash balance as it's a non-cash item, aligning with the principles of cash flow from operating activities.
Hence, the correct option is 4.
