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okay sir, but still this question below that i faced in my textbook can not be explained by what you taught me, as they don’t use T entry to get the purchase of investment as opposed to the working of investment in Example 6.
SOFP
Current Asset…………2007……….2006
Investments…………….95……………20SOCI
Investment income…………………….3so the answer is below
Cash flows from investing activities.
Investment income received…………………….3
(there is no purchase of investment!!! i’m 100% sure. )this question is exactly the same type of question compared to the investment part in Example 6.
but why the above question doesn’t open T entry to get the purchase of the investment and why the Example 6 chapter19 opens T entry to get the purchase of the investment.
i was talking about this inconsistency, Sir….
Thank you for your explanation of the interim dividend. now clear:)
In example 6 there is no investment income
In the question that you have posted, the ONLY movement in the Investment T account is the recording of the purchase of new investments
What’s the double entry (the debit and the credit) to record $3 investment income?
Dr Cash Account $3
Cr Investment Income Account $3In this question, we have an Investment Account
It has a brought forward figure on the debit side of $20
It has a carried forward figure on the credit side of $95
When we recorded that $3 investment income 5 lines higher up this post, how much, and on which side, did we affect the Investment Account? (Please don’t confuse the Investment Account with the Investment Income Account – the first is an asset account and the second in an income account)
OK, we didn’t put that $3 anywhere within the Investment Account – it was recorded in the Investment Income Account
So now we’re ready to start putting figures into the statement of cash flows
We know that, in Investing Activities, we have the receipt of cash $3 from our Investment Income Account
But what about the Investment Account – there’s movement in that account – it started at $20 and it finished at $95 so there’s an increase in the cost of the investments that we hold of $75 ($95 – $20)
And that must be an outflow of cash recorded as “Purchase of Investments” within the Investing Activities section of the statement of cash flows
You have posted:
“Cash flows from investing activities.
Investment income received…………………….3
(there is no purchase of investment!!! i’m 100% sure. )”Well SOMETHING must have caused that increase in the Investment Account for it to increase from $20 to $95 – what makes you 100% sure that there is no purchase?
I’m waiting to hear from you!
Consolidated statements of cash flows are not in your syllabus until you get to P2 – here’s an extract from the F7 syllabus taken from the ACCA website:
“Prepare a statement of cash flows for a single entity (not a group) in accordance with relevant accounting standards”
so much appreciate your answer, Mike. Now I realize what the mistake is.
if i could post the photo that shows the question of my textbook on this forum, it would be easy to let you know….I’ll jot down all figures relevant to the investment account in the question.
Notes:
Current asset investment:
the current asset investment is an investment in 30 days government bonds.SOFP
Current Asset…………2007……….2006
Investments…………….95……………20so the answer is below
Cash flows from investing activities.
Sale proceeds of tangible non-current assets..21
Purchases of tangible non-current assets……..(106)
Investment income received…………………….3
Government grants received……………………….50just to be sure, i write down all the options in the investing activities.
other than them, there is nothing about the investment account factors.
i know the investment income received is not relevant now, so got rid of it.Honestly, that’s all on the answer sheet.
many thanks Sir
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