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Dear Mike.
Hello, Sir good morning:)
Currently, I am solving a question related to Statement of cash flows.
(One of the additional information is that ” the accruals balance includes interest payable of
$33,000 at 30 September 2002 and $6,000 at 30 September 2003.)
Current liabilities>………2003……………..2002
Accruals………………………36………………….33
the answer sheet working is like below
Movement in Sundry accruals excluding interest payable.
Accruals c/f (36-6)……30
Accruals b/f (33-33) ….0
Increase in Accruals …30here, i don’t understand why they deduct interest payable from accruals.
It seems to you that it’s really fundamental question….. but i don’t know really what it is going on.
why? why? we must deduct interest payable accruals from the accrual account?
please just explain to me the reason to deduct.
thanks for your help.
Regard
your student.Because we deal with interest separately
Those other accruals of 30 as at the end of 2003 relate (say) to electricity and telephone and are accounted for within the section within operating activities “movements in working capital”
Interest, on the other hand, is dealt with separately
First to arrive at Profit before tax
Then to effect the add back of the interest expense within the statement of profit or loss
And finally to include within operating activities the figure for interest actually PAID in the yearOK?
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