Operating and Non-Operating difference

This query is : Resolved

Pandiri Ramu (Querist)
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10 August 2010 Dear Friend,
I need one Clarification regarding below mentioned topic. Generally I have noticed in the Books that while calculation Operating Profit , there are two methods :
1.Operating Profit = (Gross Profit + Operating Income) - (Operating Expns )
2. Operating Profit = (Net Profit + Non-operating Expns & Losses) - (Non-Operating Incomes & Gains )
So, could you please let me know whether I need to consider " Depreciation on Plant & Machinery" as Operating Expns/Losses or Non-Operating Expns/ Losses or not, to calculation correct amount of Operating Profit.
And Please let me know is there any difference between "Funds Generated from Business Operations" ( Not Cash Generated from Business Operations ) & Operating Profit. If so, what is that difference. Kindly clarify the same.
Many thanks in advance,

CA SMR

CA SMR (Expert)
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10 August 2010 Depreciation on Plant & Machinery is operating expense.
Fund flow is the change in working capital hence will be different from Operating Profit.

Shudhanshu Agrawal

Shudhanshu Agrawal (Expert)
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11 August 2010 Righty answered by Ms. Sukanya. Operating profit means profits which is earned by following the business operation for which business was established. In costing also depreciation on Plant & Mach is part of factory overheads. So depreciation on Plant & Mach should be considered as operating expense.

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