1. Profile photo of Mahoysam says

    Hi Mr Mike!! :)

    I have a question regarding the cash flow statement.

    First of all, the interest payment, why do we add the interest to the profit before tax when adjusting for non cash items and then we subtract it again under operating activities? (when we deduct interest, tax and dividend paid), I don’t see the point of adding it and subtracting it, do I have to do that?

    Secondly, Some non cash items such as unwinding the discount and FV adjustments – I thought I should adjust for them when I am adjusting for the non cash items at the top of the statement, but the way it was solved in my revision kit is that for example they subtracted the unwind-ed discount when they were accounting for the finance cost and they adjusted for the FV when they were accounting for the investment income – I believe the net effect is the same, whether I do it my way or their way, so does it matter? (e.g. If I subtract an increase in FV of an investment of 20 from the profit at the top and then I account for the whole income without subtracting the FV adjustment from it, the effect is the same, so can I do it my way?

    Regarding Q2 on the paper ( i hope it is okay to post it here) – We often get revalued PPE in that question and so on, something I need to ask about, do we assume that the depreciation charge of a company is done at the beginning of the year? I often get confused about this, sometimes the question tells me the asset was revalued at the end of the year and its remaining useful life is xx years, I understand here that the accounting treatment is to calculate the depreciation based on the restated amount over the remaining useful life but the question, is the depreciation charge here based on the original value of the asset since the asset was revalued at the end of the year so it should have been calculated before the revaluation? I hope I made my point clear and I hope this is not too long for you.

    Many thanks!


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