Cash flow problem

Others 675 views 5 replies

Can anyone please explain me why premium on redemption of preference shares is not adjusted in operating activities in FM (May 2011) paper.......Please also explain the share premium A/c....

Replies (5)

probably in that question there was a share premium a/c in balance sheet,you see when we redeem pref share the journal is

pref share cap -dr

premium on redmn--dr

 to pref. share holders

and to cancel out the premium we use the share premium a/c and pass the entry

share premium--dr

to premium on redmpn.

 

thats why premium was not adjusted on operating activity because it didnt have any relation with p/l

 

sprite ,clear hai!!!!!!!!!!!!!!!

It's the result of financing activity. So the outflow(face value + premium paid on redemption) would be shown under financing activity and not operating activity.

Originally posted by : CA Sumit Patwari

It's the result of financing activity. So the outflow(face value + premium paid on redemption) would be shown under financing activity and not operating activity.

agreed

cheers

Dear Gaurav,:)

    Share premium is a result of Investing activity not operational activity and it is the reason

All the Best 

premium on redemption will be shown in operating activity under adjustment of non-cash items and (fase value of share + premium )show in financing activity....


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