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Cash flow statement

reena (reena9823@gmail.com) (165 Points)

01 January 2013

Dear Colleagues,

I have to prepare Cash Flow Statement. Balance Sheet as on 31/03/2012 and 31/03/2011 is given. I want to know the treatment of the following items in Cash Flow Statemnt (Indirect Method).

Assets As on 31/03/2011 As On 31/03/2012

Share Issue Expense -- 20000

Cost Of Issue Of Debentures 5000 --

Kindly Reply Soon. Justify your answer if possible.

Thanks In Advance.

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8 Replies

Pijush Roy (ERP SAP Functional Tester) (281 Points)
Replied 01 January 2013

Assets balance is not available in question. May be increase or reduce. Cash inflow or outflow from investment activities. Issue of share & debenture is financial activities.

Sanket (!..Live to Give..!) (16427 Points)
Replied 01 January 2013

Regarding Share issue expenses - It is to be deducted from Paid up value of equity shares and the net amount proceeds from issue of equity share is to be shown under Financial activities.......

Regarding Cost of issue of debentures - The expenses is to be amortised under the Operating Activities.....

1 Like

CA Lokesh Pokharna (CA (Ahmedabad Bhilwara Chittorgarh)) (4128 Points)
Replied 02 January 2013

These are not operating activities , these are directaly related with finnacing activity... these shoud be shown as a outflow in financing activites , apart from inflow from fund raised via share or debenture or whatever instrument issued.

khushal (ACA; CS Professional Gr. II & IV Cleared; Pursuing ACCA UK & Bcom Graduate) (63 Points)
Replied 02 January 2013

The Solution to the Query raised depends ..on Whether the Company is engaged in providing finance or whether the company is under any activity other than providing finance..

Now if the company is engaged in providing Finance then the Expenses to be classified under the operating activities.

If the company is engaged in any activity other than the finance lending; Then the Expenses should be shown under the Finance Activity.

(As per AS -3 Cash Flow Statement)

MANOJ (Learner) (884 Points)
Replied 02 January 2013

Hai Reena

here is my solution

1. share issue expense is a financial activity under AS3 as it results in change in Oeners' capital.

2.Cost of issue of Debentures amounting to rs.5000 is amortzed in2011-12.So as you are following Indirect method , add the rs.5000 back as it is a non cash transaction.

1 Like

Jagjeet singh sahney (CA) (70 Points)
Replied 02 January 2013

As Share issue expenses have been incurred in the current year i.e. 2012 hence they shall be shown in the Financing Activities as outflow of Cash and Cost of Debentures have been written off hence they shall be shown under operating activities under the heading Adjustments for:

1 Like

CA DIGANT CHADHA (Academician & Consultant) (195 Points)
Replied 18 January 2013

these are outflows under financing activities, as issue of shares and debentures is itself a financing activity. thanks

Jag Bhushan Sharma (Faculty in a B-School) (633 Points)
Replied 23 January 2013

a. Rs.20000 spent during the current year (2012) is an outfulow on account of financing activities and it shown under financing activities as an outflow.

b. Rs.5000 which appeared in the balance sheet of last year (2011) does not appear in 2012, this means this amount has been amortised (it has been written off to Profit & Loss Account). This means P & L Account has been debited with Rs.5000. So while making adjustments to find out cash from Operating Activities, add back Rs.5000 to profit of 2012.

I hope I have made my point clear. In case of any doubts, don't hesitate to ask again.

I have uploaded a video on youtube on subsidiary books. I will be grateful if you could kindly give me your feedback. I have attached link of that video.

https://www.youtube.com/watch?v=pPk2TFtEFrg