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.
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  • 23
if the date of issue of or redemption of debentures is not mentioned, then it is calculated on the previous year amount assuming that the new debentures were issued on the last day of the year. if the date is mentioned, if they are issued in the beginning of the year, then u have to take interest on the current year figure..
  • 19
but there was a question in which they calculated int on deb for current year though nothing was mentioned about the date-t.s.grewal model paper 2
  • 11
If u see the the notes that they have given at the end of the answer, u'll see that they have made an assumption that the  new debentures were issued in the beginning of the year. interest in such a case will be calculated on the current year figure. If nothing is mentioned in the question, then u can apply interest on any of the figures n just give an assumption regarding the same. But, it is better to assume that they were issued on the last day of the current year if the ques is silent about the issue date.
  • 7
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