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Proceeds of a long term loan amounting to Rs. 5.0 million were specifically used for
purchase of property, plant and equipment.,
should we include this in investing and financing activities as the net effect is zero ? and also the treatment in PPE ? is there any treatment choices
thank you!The proceeds of a long-term loan are shown as flows from financing activities.
The purchase of PPE is shown as flows from investing activities.
The fact that they are of the same amount is completely irrelevant.
And no, there are not choices as to the treatment of these.
Have you watched my free lectures on Statements of Cash Flows? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
so you are saying ,they cant be a investing and financing at same time ? isn’t a simple inflow of cash and then outflow?
actually this is from consolidated cashflow question and in the solution they completly ignore the point , didn’t mention inflow ( 5m loan) in financing and didnt mention outflow in investing and same they did in PPE ..
according to me it should be 5m financing +ive and 5m investing -ive and in ppe addition of purchase ,
what is wrong with this treatment , what am i missing plzz helpYou did not say that it was anything to do with consolidations!!
Consolidated cash flow statements are not examinable in Paper FA.
consolidation is a part of this question but this specific part i have problem with is a basic one and related to fa that is why i have asked it here , plz explain .
As I replied before, if the statement of cash flows is for a single company then the two items you referred to must be shown separately.
If it is a consolidated statement of cash flows then you must ask in the Paper FR forum – not this one. This forum is only for questions relating to the Paper FA syllabus and in Paper FA you cannot be asked about the consolidated Statement of Cash Flows.
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