How is capital reserve treated in cash flow statement?
 

Hi,

Increase in Balance of Capital Reserve: Increase in the balance of capital reserve generally relates to profit/gain on the sale of fixed assets. In the context of cash flow statement, increase in balance of capital reserve must be with the amount of profit/gain. This will not affect the cash flow statement in an unusual manner, except for showing the profit as 'deduction' under Operating Activity and as a component of sale proceeds under Investing Activity. 

Decrease in Balance of Capital Reserve: Decrease in the balance of capital reserve relates to writing-off of capital losses against the capital profit. Since, this does not involve any change in the cash balance (inflow/outflow), consequently it won't affect the Cash Flow Statement.

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it is added to net profit
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