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- This topic has 1 reply, 2 voices, and was last updated 7 years ago by MikeLittle.
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- March 29, 2017 at 3:43 pm #379546
hi mike
this is regarding cash flows
why is amortization on grants treated as a non cash adjustment and deducted, but w actualy receive cash?
and i dont understand how do we get the receipt of govt grants and how to calculate payments of finance lease obligations?
many thanks
March 29, 2017 at 4:57 pm #379556When we receive the government grant, we receive cash (in the same way, when we buy an asset, we pay cash)
When we spread the grant over the life of the grant (or when we spread the cost of the asset over the life of the asset) that is a non-cash item – exactly like depreciation is a non-cash item
Is that OK?
You don’t understand how you get a receipt of a government grant – we apply to the government and ask for money and the government, if they approve your application, sends you the money
Dr Cash
Cr Government GrantsYou don’t understand how to deal with finance leases in a cash flow question
Open a T Account titled Finance Lease Obligations
Put into the credit side with the narrative “brought forward” the TWO amounts brought forward – you’ll find them in last year’s statement of financial position in Non-current Liabilities (Long Term Liabilities) and in Current Liabilities
Put into the debit side with the narrative “carried forward” the TWO amounts carried forward – you’ll find them in this year’s statement of financial position in Non-current Liabilities (Long Term Liabilities) and in Current Liabilities
There is invariably a new asset acquired this year under a finance lease. Put the fair value of that asset on acquisition into the credit side of the T account
Balance off the account and the missing figure represents the amount of cash paid to the finance lease creditors this year
Is that better?
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