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Dear Mike,
I have watched lectures on cashflows, but am still a little confused on Chapter 19 you give an example of a full cashflow statement – Indirect method
Op Act:
Investment income
Interest Expense and Interest PaidBut also in Investing Act:
Investment income receivedCan you please explain the difference between them?
Thanks
The figure in Operating Activities is a deduction of the accruals based figure that will have been added to the operating profits to arrive at profit before taxation
Because it has been added as an income, and because it’s accruals based and not cash based, we need to deduct it from ‘profit before taxation’ to enable us to arrive at “Net cash flow from operating activities”
Now, we can work out how much actual cash has been received and that actual cash received amount goes into ‘investing activities’ as an addition
It could well be the case that the two figures are the same amount but, equally, they could well be different!
Better?
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