1. avatar says

    Yep, I understand the reason why you put long-term assets at a special category due to the advance payment to purchase those assets. And then, we just deduct the cost by using depreciation method so there’s nothing change with cash. However how to solve “Prepayment”. This account has the same procedure as long-term assets, hasn’t it? Should I put the expense of the year which is deducted from prepayment next to depreciation in Cash flow statement and use the amount of cash we recently credit to debit prepayment instead of the gap between two years to calculate the cash change ?

    • Avatar of johnmoffat says

      Prepayments are dealt with in exactly the same way as receivables. The change over the year is added to or subtracted from the accounting profit in order to arrive at the cash generated from operations.

      • avatar says

        Thank you very much :) Besides, There is a difference between the ACCA F3 paper and your lecture. In the paper Interest expense is stated in the category “Adjustment for” but in your lecture it is not. Is it a mistake of printing? Or just this example doesn’t need it? Thank you :)

      • Avatar of johnmoffat says

        You can either start with the profit before tax and then immediately add back the interest expense, or you can start with the profit before interest and tax – both end up exactly the same.
        Whichever you do, the interest paid is subtracted at the end (along with dividends paid and tax paid) to get the cash generated from operating activities.

  2. avatar says

    Hi, my first comment ever on this website.

    How would i account for deferred tax, if it appears in the income statement and in NCL? would i approach it the same way Tax liabilities was approached ( T accounts method) in this video?

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