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Cash flow

Suresh Pai S (Tax Consultant) (1029 Points)

12 January 2017

In a question to prepare cash flow, one item namely 'compensation received from a suit filed' is given as an item. The said item is already included in profit and loss account.

What is your probable adjustments in cash flow?

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7 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 12 January 2017

It is an extraordinary item which should be classfied into operating/investing/financing activity as applicable

Suresh Pai S (Tax Consultant) (1029 Points)
Replied 13 January 2017

It should be added to profit first isn't it?

Suresh Pai S (Tax Consultant) (1029 Points)
Replied 13 January 2017

my problem is that they have not added the income to profit before classifying it to operating activities.

Hsk (Student CA Final ) (172 Points)
Replied 15 January 2017

The proper treatment should be :
If it is added already in PnL statement then it should be first reduce from it and then show as an extraordinary item in operating activities. (Assuming this compensation is related to supplier or normal course of business activity)

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Suresh Pai S (Tax Consultant) (1029 Points)
Replied 16 January 2017

@ HSK. I agree to you. That was what I thought. My problem was that in the study material, they didn't reduce the specific item before classifying it as an extra ordinary item in the cash flow statement under the head cash flow from operating activities.

Hsk (Student CA Final ) (172 Points)
Replied 16 January 2017

for this you should refer it to BOS. bcuz, if it is already included in PnL then we need to deduct it first in order to Show it separately. @ Suresh Pai S

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