Cashflow statement

A/c entries 1974 views 2 replies

Guest

I have question regarding preparation of cashflow statement that if capital redemption reserve appear in balancesheet like

following

Balance of capital redemption reserve as on 31 march 2011 is 1,00,000

balance of capital redemption reserve as on 31 march 2010 is nil

why we don`t take transfer to C.R.R while preparing cashflow statement

friends please comment on my query

this is done in a question given practice manual ie question asked in may 2003

Replies (2)

Siddarth R Sunder Ram

Finance Professional

230 Points Joined June 2010

Assuming we are using the indirect method of cash flow statement preparation, the cash flow from operating activities is arrived at by adjusting "PROFIT BEFORE TAXES" for non-cash and non-operating expenses and incomes. You'll see that a transfer to CRR is not an expenditure but an "appropriation" after PAT involving no cash outflow. Hence there would be no adjustment on that account in the cash flow.