In cash flow statement interest on debentures and investment is calculated on previous year or current year
Dear Students,
In such questions it is to be assumed that debentures or investments have been issued/purchased at the end of current year. Accordingly, interest would be provided at the opening balances.
Aishwarya, we suggest you to follow the same line of thought and not to worry for the final answer as it would not be affected.
Interest on Debentures is a non-cash and non-operating expense and is to be added to Net Profit before tax and extraordinary items with an amount say x and with the same amount it is deducted from financing activities. However, Interest on Investments is a non operating income which would be deducted from profit before tax and extraordinary items and later added to investing activities with the same amount. Accordingly, the net result would be the same.
Hope you understand the logic.
Keep posting!!
In such questions it is to be assumed that debentures or investments have been issued/purchased at the end of current year. Accordingly, interest would be provided at the opening balances.
Aishwarya, we suggest you to follow the same line of thought and not to worry for the final answer as it would not be affected.
Interest on Debentures is a non-cash and non-operating expense and is to be added to Net Profit before tax and extraordinary items with an amount say x and with the same amount it is deducted from financing activities. However, Interest on Investments is a non operating income which would be deducted from profit before tax and extraordinary items and later added to investing activities with the same amount. Accordingly, the net result would be the same.
Hope you understand the logic.
Keep posting!!