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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Cash flow
Replies (7)
It is an extraordinary item which should be classfied into operating/investing/financing activity as applicable
It should be added to profit first isn't it?
my problem is that they have not added the income to profit before classifying it to operating activities.
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)
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)
@ 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.
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
I will convey the mistake.
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