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Hallo,
When you say in you example that “Suppose the interest receivable in the Statement of profit or loss is 20” and “Suppose that on the Statement of financial position there was interest owing to us of 8 last year and 5 at the end of this year”, these 20 include the 8-5=3, which 3 we have actually received, plus another 17, which are not shown in the SOFP, so the 17 have nothing to do with 8 from last year, the 5 from this yr, but we have received 17 as income – interest received, a separate income account, rather than SOFP a/c as cash?
Thank you!
Hallo,
I also have a second question, regardinh interest paid and received, is it always that interest paid is allocated to CF from operating activities, and interest received to CF from investing activities?
Thank you!
If there is interest receivable of 20 in the SOPOL then 20 is the amount that has been earned this year.
If we are still owed 5 at the end of this year, then it means that we have not actually received all of the 20. We have earned 20, but only received 15 – the other 5 is still owing to us.
If there was 8 owing to us at the start of this year, then it was 8 that we had earned last year but had not received the money. This must have been received this year in addition to the 15 detailed above. So a total of 23 is the cash actually received.We do not record cash received in the SOPOL – we always record income earned, which is not the same thing. Just as we always record expenses incurred, which is not the same as the cash actually paid!
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