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Dear Chris,
Hope you are fine.
Could you please explain what should we de if we buy an asset on credit? Suppose we buy an asset with cost of 1.000 buy will pay the amount in next year.
Then what should we do in cashflow? show it or do not show it?! I mean:
1)
Operating activities : Increase in other payable 1.000
Investing activities : purchase of asset (1.000)OR
2)
Operating activities : Increase in other payable 0
Investing activities : purchase of asset 0which one is correct? could you please help.
Thank you very much
Hi,
I’m fine thanks, though a bit tired after just getting back from my brief visit to China.
There would be a debit entry to PPE in the T-account but there is no cash outflow in relation to it.
The credit entry is to payables and would therefore have an impact on the increase/decrease in the payable balance through cash generated from operations.
Thanks
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