treatment of interest on bank overdraft in cash flow statement ?
for example- if previous year balance sheet shows 10000 interest on bank overdraft and current year shows 15000 as interest on bank overdraft ,then what to do?
Dear Student,
Interest on Bank Overdraft is added directly to the balance of our Overdraft Account by the Bank . Also, Bank overdraft is considered as part of our Cash & Cash Equivalents while preparing Cash Flow statement.
Therefore, Rs. 10,000 in the question the balance of previous year would be added to the sum of all the three activities (Operating ,Investing & Financing) along with the opening balance of other Cash & Cash Equivalents so that their total match up with the closing balance of Cash & Cash Equivalents which would include Rs 15,000 of Bank Overdraft.
Regards,
Interest on Bank Overdraft is added directly to the balance of our Overdraft Account by the Bank . Also, Bank overdraft is considered as part of our Cash & Cash Equivalents while preparing Cash Flow statement.
Therefore, Rs. 10,000 in the question the balance of previous year would be added to the sum of all the three activities (Operating ,Investing & Financing) along with the opening balance of other Cash & Cash Equivalents so that their total match up with the closing balance of Cash & Cash Equivalents which would include Rs 15,000 of Bank Overdraft.
Regards,