Cash flow statement OT notes; finance cost and interest paid

This topic has 6 replies, 4 voices, and was last updated 3 months ago by P2-D2.

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April 11, 2022 at 1:29 pm #653080
anazoric
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I noticed the solution at page 126 (chapter 4) has finance cost of 400,000 added and then subtracted from operating cash flows. Why is this done?
April 12, 2022 at 5:33 am #653123
Sourav9271
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There’s an immense difference between
Finance cost which is added back
And Interest paid
which is further deducted
April 12, 2022 at 12:13 pm #653148
anazoric
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In the original question, finance/interest is mentioned only once in the SOPL extract. How did they get the idea that it was paid back? There’s no where in the question that mentions interest being paid.
April 13, 2022 at 6:05 am #653201
Sourav9271
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When there is no opening and closing interest then the finance cost is deemed to have been the same as interest cost…

Usually in question the interest paid and finance cost aren’t the same ..
Thus that proforma.
April 13, 2022 at 12:21 pm #653240
P2-D2
Keymaster
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Hi,

Regardless of whether the finance cost and the interest paid are the same, the finance cost will always be added back to the profit before tax so that we can work back to the profit from operations before adjusting this to calculate the cash generated from operations.

We then need to deduct the interest paid to get to the cash flow from operating activities.

Thanks
April 22, 2022 at 11:47 am #654284
Alina
- Topics: 0
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Hello,

Trying to add to my monthly management accounts file a monthly statement of cash-flow. I struggle to extract the correct numbers from my TB. I am getting a difference on each month. Applying all this in real life is more complicated that I though. There are so many nominals and I am trying to guess what am I adding that I shouldn’t or what am I missing. HELP!
Stock is not the stock, I also have Stock in transit and Stock write offs( which is a nominal I am using on all stock taken/movements for the year and at the end of the year I will adjust the P&L with the balance as I have created a provision at the begin of the year, should I take this nominal into consideration or not? Debtors, I have the control a/c but I also have the provision created for the bad debts, would I take the movements of this nominal into consideration?

Thanks and apologies for the long post.
April 30, 2022 at 10:31 am #654639
P2-D2
Keymaster
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Hi,

Sorry, but I’m here to answer questions specific to the ACCA FR exam and not answer work related questions. You could post the question on the other forum and see if any students are prepared to answer it for you.

My only suggestion would be to possibly look at EBITDA as a close approximation of the cash generated each month.

I hope you find your answer.

Thanks
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