cash flow from operating activities

[zia ahmad]

AOA.plz give me guidence relating to non cash items in operating activites under indirect method. that "is the gain/loss on sale of
fixed assets or investment is treated as non-cash item"?? if yes what is logic behind it?? i shall be very glad
regards

[wsafca]

Gain / loss on the sale of asset is a non cash item.

I Just give an example to explain.

Asset Cost = Rs. 100,000
Acc. Dep = Rs. 60,000
Sold for = Rs. 50,000

Now what is Profit here? yes Rs. 10,000
Now What is received in cash ? Yes Rs. 50,000

Cash inflow is Rs. 50,000 but not Rs. 10,000 in other words, cash inflow is the sale proceed but not the profit.Therefore we treat it as non-cash item.

Regards

Waqas

[zia ahmad]

thanks brother for guidance. now i got the point