How do u treat insurance and pre paid insurance while preparing cash flow statement in operating activite?
In a problem(practise manual sum no 2 cs statement paduka sum no 3) pre paid insurance is shown in WC changes where as insurance is not adjusted at all y?
Insurance debited to profit and loss Account No need to make any adjustment assuming it is incurred for operating activity.
(Closing Pre paid insurance premium less opening Pre paid insurance premium) ,if positive , then subtracted as Increase in Current assets. AND ,if negative , then added as decrease in Current assets.
thank u so much dude....
the purpose of insurance is to prevent our business from uncertainties....that means to carry out our business activities smoothly.....that is to say that the purpose is operative......hence no adjustment is regarded of insurance in CFS
On the other hand prepaid insurance is our current asset and hence the adjustment of same is required in working capital changes.........if there is an increase in the amount of prepaid insurance from the opening balance then it is to be deducted and vice versa
thanks guys for ur answers i wud like to know de sources from where got these info?
source - class 12th study
Can anyone will plz suggest me that when to take Interest on Debenture in cash flow statement ???
| Originally posted by : ROHIT CHATURVEDI | ||
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the purpose of insurance is to prevent our business from uncertainties....that means to carry out our business activities smoothly.....that is to say that the purpose is operative......hence no adjustment is regarded of insurance in CFS On the other hand prepaid insurance is our current asset and hence the adjustment of same is required in working capital changes.........if there is an increase in the amount of prepaid insurance from the opening balance then it is to be deducted and vice versa |
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