Statement of cash flows – introduction – ACCA Financial Reporting (FR)
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Please explain why Finance Cost is being added back and why investment income is being deducted from the PBT.
i think it is because for the first portion it is talking about the cash generating from operating activities, so if the P&L already took into considerations for finance cost and investment income, hence we need to reverse them in this section. When we doing the part for cash generated from investing and financing activities, then we will minus and add the cost and income accordingly to calculate the net cash gain/(loss)
Good
Thanks!
how finace cost in sopl is credit in t account of intrest payable ?
usualy expense is debit balance right ?
Interest expense is debited in income statement and it also increases the liability so that’s why there’s a credit in interest payable account.
Journal entry:
Expense- debit(SPL)
Interest payable- credit.(SOFP)
I believe it’s Finance cost is put on Credit side to follow credit opening balance of Interest payable.
I look at it this way:
Interest payable Opening (SPF PY): (100)
Finance cost paid (SPL CY): (50)
Interest paid in cash (SCF CY): ???
Interest payable Closing (SPF CY): (20)
So using this Dr-Cr table we have:
-100 – 50 = -150 PLUS 20 (since Interest payble Closing is on the Dr side) = -130
The idea is I had 100$ liability at PY (from SFP) , also I’ve accrued 50$ more during this year (SPL), and at the end of CY year I have only 20$ (SFP). So if I owed 150$ but now I only owe 20$, this means I’ve repaid 130$ (cash outflow)
How come we have to reduce the profit and add the loss on the disposal of the PPE? What is the logic behind it?
the profit or loss on disposal is basically an assumption, since the depreciating element used in arriving the profit or loss. Since the initial adjustment in the SOPL was to add the profit on disposal to the PBT, we have to deduct it from the PBT in the Statement of Cash Flow in order to get the actual profit.
i just have a simple understanding that gain increases income and loss reduces income; therefore, in order to see the actual cash flow, we would remove the gain or add back the loss since they are non cash items.
you are right.
There must be a missing video about the ‘statement of changes in equity’ part. In the note, there is a separate page about SOCE and Chris also mention that at the beginning of this vedio, but we didn’t see it either in this or the previous video. Please check it.
video on Statement of Changes in Equity not present
Dear Opentuition
I think there is a missing video related to Statement of change in Equity. as Mr. Chris mentioned at the end of his video
Because they are items of cash outflows!
There must be a missing video about the ‘statement of changes in equity’ part. In the note, there is a separate page about SOCE and Chris also mention that at the beginning of this vedio, but we didn’t see it either in this or the previous video. Please check it.
interest paid and tax paid are cash items , why deduction on socf?
They are payments in cash, and hence deductions given they will have reduced our cash figure.