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Querist : Anonymous
Querist :
Anonymous
(Querist)
17 April 2013
SIR, IF A LTD PURCHASE FIXED ASSET FOR RS 4,50,000 & A LTD ISSUE RS 1,00,000 DEBENTURE AS PART OF PAYMENT & FOR REMAINING AMOUNT SHOULD BE REMMIT BY CASH i.e rs 3,50,000.
sir my question is that,issue of debenture should be considerd in cash flow financing activities or not.
sir my question is that,issue of debenture should be considerd in cash flow financing activities or not.
18 April 2013
No just cash entry only
Message likes :
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Querist : Anonymous
Querist :
Anonymous
(Querist)
22 April 2013
what is the difference between income tax refund & double income tax refund?why single income tax refund not accounted and double income tax refund accounted?
14 July 2024
Let's address your questions step by step:
### 1. Treatment of Issuance of Debentures in Cash Flow Statement:
When a company like A Ltd purchases a fixed asset for Rs 4,50,000 and issues Rs 1,00,000 worth of debentures as part of the payment, with the remaining Rs 3,50,000 paid in cash, the treatment in the cash flow statement is as follows:
- **Cash Flow from Financing Activities:** The issuance of debentures is considered a financing activity because it involves raising funds from external sources (investors who buy the debentures).
- **Cash Flow from Investing Activities:** The purchase of the fixed asset for Rs 4,50,000 is considered an investing activity because it involves the acquisition of a long-term asset that will generate future economic benefits.
Therefore, in the cash flow statement:
- The Rs 1,00,000 received from the issuance of debentures will be included under **Cash Flow from Financing Activities** (as an inflow).
- The Rs 3,50,000 cash paid for the fixed asset will be included under **Cash Flow from Investing Activities** (as an outflow).
### 2. Difference Between Income Tax Refund and Double Income Tax Refund:
- **Income Tax Refund:** This refers to the refund received from tax authorities when the amount of tax paid exceeds the tax liability calculated after filing the tax return. It typically arises due to overpayment of tax or claiming excess tax credits.
- **Double Income Tax Refund:** This term is not standard in accounting or tax terminology. However, if we consider it in a hypothetical context:
- If "double income tax refund" implies receiving two separate refunds for the same tax period or for different tax assessments that overlap in time, the accounting treatment would depend on the circumstances.
- Generally, income tax refunds are recognized when the refund is receivable based on the tax assessment. The timing of recognition in the financial statements depends on when the refund is reasonably assured.
### Why Single Income Tax Refund and Not Double Income Tax Refund?
- A single income tax refund is accounted for when the refund is reasonably assured and is expected to be received. This is based on the assessment of tax payable versus tax paid.
- A "double income tax refund" scenario would be unusual and may indicate an error or an unusual situation where refunds are received for the same period or tax assessment. In such cases, proper documentation and explanation would be required to justify the receipt of double refunds, if it occurs.
### Conclusion:
- The issuance of debentures should be considered in the cash flow statement under financing activities.
- An income tax refund is the standard refund received when taxes paid exceed the tax liability, while "double income tax refund" isn't a standard term and would require specific context to understand its meaning and accounting treatment.
### 1. Treatment of Issuance of Debentures in Cash Flow Statement:
When a company like A Ltd purchases a fixed asset for Rs 4,50,000 and issues Rs 1,00,000 worth of debentures as part of the payment, with the remaining Rs 3,50,000 paid in cash, the treatment in the cash flow statement is as follows:
- **Cash Flow from Financing Activities:** The issuance of debentures is considered a financing activity because it involves raising funds from external sources (investors who buy the debentures).
- **Cash Flow from Investing Activities:** The purchase of the fixed asset for Rs 4,50,000 is considered an investing activity because it involves the acquisition of a long-term asset that will generate future economic benefits.
Therefore, in the cash flow statement:
- The Rs 1,00,000 received from the issuance of debentures will be included under **Cash Flow from Financing Activities** (as an inflow).
- The Rs 3,50,000 cash paid for the fixed asset will be included under **Cash Flow from Investing Activities** (as an outflow).
### 2. Difference Between Income Tax Refund and Double Income Tax Refund:
- **Income Tax Refund:** This refers to the refund received from tax authorities when the amount of tax paid exceeds the tax liability calculated after filing the tax return. It typically arises due to overpayment of tax or claiming excess tax credits.
- **Double Income Tax Refund:** This term is not standard in accounting or tax terminology. However, if we consider it in a hypothetical context:
- If "double income tax refund" implies receiving two separate refunds for the same tax period or for different tax assessments that overlap in time, the accounting treatment would depend on the circumstances.
- Generally, income tax refunds are recognized when the refund is receivable based on the tax assessment. The timing of recognition in the financial statements depends on when the refund is reasonably assured.
### Why Single Income Tax Refund and Not Double Income Tax Refund?
- A single income tax refund is accounted for when the refund is reasonably assured and is expected to be received. This is based on the assessment of tax payable versus tax paid.
- A "double income tax refund" scenario would be unusual and may indicate an error or an unusual situation where refunds are received for the same period or tax assessment. In such cases, proper documentation and explanation would be required to justify the receipt of double refunds, if it occurs.
### Conclusion:
- The issuance of debentures should be considered in the cash flow statement under financing activities.
- An income tax refund is the standard refund received when taxes paid exceed the tax liability, while "double income tax refund" isn't a standard term and would require specific context to understand its meaning and accounting treatment.
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