Accrued loan interest in Statement of cash flow

This topic has 2 replies, 2 voices, and was last updated 15 years ago by quynhmoonsun.

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February 24, 2011 at 8:30 am #47400
quynhmoonsun
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When calcutling the adjustment for cash generated from operations we have to add back depreciation, interest and deduct investment income because these are NOT CASH items. Please advise how to treat with the ACCRUAL LOAN INTEREST?
1. Why isn’t it added back?
2. Why is it written off with LOAN INTEREST ?
This is for PLANTER (2.5 6/04).
Thank you all for your guide.
February 24, 2011 at 4:35 pm #77236
MikeLittle
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Hi I think if you follow the OT course notes, and specifically the example about loan interest in the Cash Flow Chapter, it should make it more clear. If you’re still confused, post again
February 25, 2011 at 1:54 am #77237
quynhmoonsun
Member
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Hi Mike,
I have read the OT course notes chapter 19, example 3 and find out that the reasons are:
1. Accrual interest is not added back because it is one part included in PAYABLES ( FINANCE LEASE)
2.Accrual enterst is written off in the Statement of cash flows because when the entity pays for the PAYABLES also account for the accrual interest.
Am I right?
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