Cash flow problem

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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