## Deriving PBT When Not Directly Given (Indirect Method)
When a question does not provide Profit Before Tax (PBT) directly, reconstruct it from how the profit was appropriated.
### Core Formula
$$\text{PBT} = \text{Transfer to Reserves} + \text{Dividend Declared} + \text{Tax Accrued (Current Year)}$$
Why this works:
PBT flows through the P&L appropriation chain:
```
PBT
− Tax Provision (current year) = PAT
− Dividends Declared = Retained Profit
− Transfer to Reserves = Closing P&L balance
```
Reversing the chain gives PBT.
### Step-by-Step Procedure
1. Identify Transfer to Other Reserves from the balance sheet movement or notes.
2. Identify Dividend Declared (both interim and final, equity + preference).
3. Identify Tax Accrued in Current Year (current-year provision created in P&L).
4. Sum all three → PBT.
### When to Apply
Use this technique whenever:
- Only PAT or closing retained earnings are given, not PBT.
- The question states components of profit distribution without stating PBT.
> Note: Use tax accrued (provision created this year), not tax paid (cash outflow). These are different amounts — see the Tax Treatment lesson.