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January 5, 2024 at 3:15 am
I am also confused by this input.
I understand that:
Profit before tax Less: Interest expense (1000)
However, I don’t think the “Interest Paid” would necessarily be 1000 in the example 1.
John Moffat says
January 5, 2024 at 10:03 am
True, although if the interest paid was different then there would be an opening or closing accrual for interest.
September 26, 2023 at 11:34 pm
So basically if we want we can show interest paid in financing activities or operating activities, same with dividends paid or received, but tax is always be going to be in cash flow from operating activities at last.
September 23, 2023 at 4:56 pm
Best explanation ever. Just to get a doubt off my head. I learned that tax payable in the beginning of year is the provision that must be paid later somewhere in the year and the entries are adjusted based on over provision or underprovision. I am trying to calculate cash paid under that method but i am not able to. Can you please elaborate on this further
September 24, 2023 at 2:42 pm
At the start of the earthy were owing 30,000. The charge for the year is 39,000 and so if they had paid nothing they would be owing 69,000 at the end of the year. In fact they are only owing 20,000 at the end of the year and so they must have paid 49,000 during the year. This is nothing to do with any specific over or under provision.
August 13, 2023 at 10:45 am
Hello Sir In the Non-Current Asset T-Account, if the opening balance is taken to be net book value of 410,000, how can we debit depreciation of 40000?
August 13, 2023 at 10:49 am
Sorry sir not debit but credit??
August 14, 2023 at 6:36 am
We don’t debit or credit anything. We are simply adjusting the profit to get a ‘cash’ profit because depreciation is not a cash item.
August 2, 2023 at 7:00 am
Sir should’nt interest and dividend paid be subracted from financing activity
July 27, 2023 at 7:29 pm
hi, the first part when we reduce the interest form the profit before tax can we add this part after the change in working capital under the tax paid… ??
July 18, 2023 at 3:53 pm
The profit before tax is after charging interest. We add back the interest charged because we are required by accounting standards to then show the interest paid as a separate item.
July 23, 2023 at 4:44 am
Thanks for your replied.
How about where there is bank overdraft? It will just less from cash? But show in working?
July 23, 2023 at 6:26 am
I saw an example:
The dividend received during the year 30,000, we will record in investment. And the dividend paid during the year 80,000, we record at financing activities.
why do we still need to record the dividend income of 30,000 in operating activities? if is required by accounting standards, why the dividend expense of 80,000 not record also in operating activities?
This is confusing. Thanks Sir John.
July 23, 2023 at 4:12 pm
A bank overdraft is negative cash and is subtracted from other cash balances in arriving at the net cash figure. There is no requirement to show workings.
July 23, 2023 at 4:16 pm
I do not know where you found the example. Dividend income is not shown as part of cash flow from operating activities. Dividends paid can be shown either under cash flows from operating activities or under cash flows from financing activities, as I explain in my lectures – either is allowed.
July 18, 2023 at 3:12 pm
Hi John, I’m kinda confused with the
Profit before tax 100000 Add: interest 1000
But then at the last part of the Less: Interest paid (1000)
Can you explain this? Thanks.
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