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Dear sir,
1. What’s the difference between interest expense and interest paid? In the BPP revision kit there is an exercise concerning cash flow statement where there is interest paid $75, and this $75 has been added in the “adjustments for” section as interest expense and it has also been recorded as interest paid where it has been minus with tax paid( interest paid-tax paid). Why so?
2. Also interest received of $25 has been recorded in the “adjustments for” section where it has been minus and it has also been recorded in “cash flow from investing activities”. Why so?
Thanks in advance
1. Interest expense in the Statement of profit or loss is the total interest for the year whether or not it has been paid.
Interest paid is the cash that has actually been paid during the year (which might be less than the total expense because some of the interest may still be owing at the end of the year).2. Both interest payable and receivable will have been recorded in the Statement of profit or loss. However on the Statement of cash flows we are required to show the operating profit (which means adjusting for the interest) and we are required to show the interest actually paid and the interest actually received separately in the statement.
In the BPP revision kit there is an exercise concerning cash flow statement where there is interest paid $75, and this $75 has been added in the “adjustments for” section as interest expense and it has also been recorded as interest paid where it has been minus with tax paid( interest paid-tax paid). Why so?
2. Also interest received of $25 has been recorded in the “adjustments for” section where it has been minus and it has also been recorded in “cash flow from investing activities”. Why so?
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