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sir i understand that payment of finance lease liabilities will be under financing activities but does the interest paid on that lease come under operating actives. Also how is it shown in statement of financial position ? it is show as an interest payable in balance sheet. I mean to ask is the figure of interest payable include both interest of long term borrowing and interest on lease?
Thank you in advance
The amount actually paid to finance lease lessors as shown in the statement of cash flows is just the capital amount paid
The interest element that is included within the instalments paid to the lessor is included within operating activities along with other interests paid (on loans and overdrafts for example)
Interest that has been PAID does not feature on the statement of financial position whereas …
… interest that has not yet been paid also does not feature on the statement of financial position. It’s not a liability until time passes
It would only appear on the statement of financial position where the most recent instalment was paid, say, on 31 October and the financial year end is 31 December. In that situation 2 months’ worth of accrued interest would appear on the statement of financial position.
I believe that answers your questions 🙂
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