what will be the effect of premium on redemption of debentures in operating and financing activities while preparing cash flow statement?
Dear Student
Treatment of premium on redemption of debentures i.e if premium on debenture is paid at redemption :
1. No treatment in operating activity.
2. In financing activity, it would be shown as payment i.e cash is reduced from this payment.
Please note that here it is assumed that premium on redemption is paid, however when premium on redemption is just booked in the accounts, then it won't affect any activity but Loss on issue account shall be added back to net profit in operating activity as it is a non-operating item.
Regards
Treatment of premium on redemption of debentures i.e if premium on debenture is paid at redemption :
1. No treatment in operating activity.
2. In financing activity, it would be shown as payment i.e cash is reduced from this payment.
Please note that here it is assumed that premium on redemption is paid, however when premium on redemption is just booked in the accounts, then it won't affect any activity but Loss on issue account shall be added back to net profit in operating activity as it is a non-operating item.
Regards