Cash Flow
This query is : Resolved
24 November 2009
Q.1 What is the treatment of Provsion for doubtful debts in Cash Flow ?
For eg -:If the opening bal. is 150000 and closing balance is 190000. In adjustments it is given that bad debts worth Rs. 230000 have been written off through Provision for Bad debts account.
For eg -:If the opening bal. is 150000 and closing balance is 190000. In adjustments it is given that bad debts worth Rs. 230000 have been written off through Provision for Bad debts account.
24 November 2009
Add back the provision as non cash expenses
24 November 2009
How much ?? 40000 or 270000 ??
And if the opening debtors are 100000 and closing 200000 ... Shall we show increase as 100000 or 230000 ?? And I request you to plz explain why we are doing what we are doing ??
And if the opening debtors are 100000 and closing 200000 ... Shall we show increase as 100000 or 230000 ?? And I request you to plz explain why we are doing what we are doing ??
24 November 2009
270000. As Rs. 270000 is the non cash provision.
24 November 2009
It should be Rs 270000 being the total provision amount debited to P&L A/c during the year (190000 + 230000 - 150000). It is a non cash expenditure.
24 November 2009
Q. Is the treatment different in fund flow as we have been taught that in fund flow no provision created against a current asset is to be added back to net profit.
24 November 2009
Both cash flow and fund flow are different
28 November 2009
My dear, cash flow and fund flow differ only in way of presentation as under :
Fund Flow
1) if we take changes in net profit +/- all non-cash and non operating items, it is funds from operation
2) Changes in working capital is shown as a separate statement including cash and cash equivalents and
3)all investing and financial activities cash flow is shown under fund flow statement(Sources side Inflow and application side outflow including taxex paid).
now take it in cash flow statement way:
A) take item 1 and 2 (excl. cash and cash equivalents) above together showing tax paid under item 3 as deduction . it is cash generated from operations
B) Divide item 3 into two parts i.e. cash flow from investing activities and cash flow from financing activities.
The total of the above bifurcation is cash generated /used during the year. to this add opening cash and cash equivalent balance. The resultant figure is closing cash and cash equivalent balance. now coming to first question asked by Gaurav, take RDD as current item and show it either as deduction from drs. and take net debtors in statement of changes in WC or show drs. at gross amount and RDD will appear with current liabilities in statement of changes in working capital. Since RDD is related to drs., it is a current item and will not directly go to funds from operation. Regards,
CA Shakuntala Chhangani
Fund Flow
1) if we take changes in net profit +/- all non-cash and non operating items, it is funds from operation
2) Changes in working capital is shown as a separate statement including cash and cash equivalents and
3)all investing and financial activities cash flow is shown under fund flow statement(Sources side Inflow and application side outflow including taxex paid).
now take it in cash flow statement way:
A) take item 1 and 2 (excl. cash and cash equivalents) above together showing tax paid under item 3 as deduction . it is cash generated from operations
B) Divide item 3 into two parts i.e. cash flow from investing activities and cash flow from financing activities.
The total of the above bifurcation is cash generated /used during the year. to this add opening cash and cash equivalent balance. The resultant figure is closing cash and cash equivalent balance. now coming to first question asked by Gaurav, take RDD as current item and show it either as deduction from drs. and take net debtors in statement of changes in WC or show drs. at gross amount and RDD will appear with current liabilities in statement of changes in working capital. Since RDD is related to drs., it is a current item and will not directly go to funds from operation. Regards,
CA Shakuntala Chhangani
29 November 2009
Thnx Mam .. Thank u very much :)
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