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1)suppose a question extract:
2007. 2006
share capital. $40,000. $30,000
share premium. $10,000. $8,000
#under ‘cashflow from financing activities’ should be:
proceeds from share issue (10+2) $12K.
in this case I am clear.
2)but if the question extract:
2007. 2006
share capital. $30,000. $25,000
share premium. $5000. $8000
#under ‘cashflow from financing activity’:
proceeds from share issue (30-25) $5k
In this case I am confused a bit.
#as,share premium decreses,it is clear that bonus issue has been made and that’s why we don’t charge anything from share premium.cause bonus issue is always excluded from here?
please explain sir..The cash inflow is (30,000 + 5,000) – (25,000 + 8,000) = 2,000
The reason is that share capital has increased by 5,000, but as you say there must have been a bonus issue because share premium has fallen by 3,000. So the share capital will have increased by 3,000 (which is bonus – not a cash inflow) which leaves only the remaining 2,000 as actual cash received.
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