Can Anyone tell me if we are preparing a cash flow statement then what is the treatment of Drawings made by the Proprietor .If we are preparing the CFS for the Proprietership concern. In my opinion it should be shown under Financing Activities.Because of decrease in the capital.
11 Replies
Pawandeep Singh Ohsan
(CA Acconts Officer)
(33 Points)
Replied 12 January 2012
We can show it under Operating Activity as reduction in profits or under Financing Activity as a reduction in capital.
Pijush Roy
(ERP SAP Functional Tester)
(281 Points)
Replied 12 January 2012
Cash Flow Statement is the mandatory for the Corporate Sector & generally Drawing is not made in the corporate sector.
Drawing in case of proprietorship company, firms & withdrawn by proprietor / partner effect the company B/S & through the reduction of assets ( cash reduction in case of cash withdrawn, other asset reduction in cash of specific assets withdrawn) & reduction of owner equity.
If Drawing in not regular activities, DRAWING reported as FINANCIAL Activities & use as OUTFLOW of cash (if other asset withdrawn except cash, it's not a part of CASH FLOW STATEMENT, it's reported as Supplementary Notes on the Statement of Cash Flow).
If Drawing is not regular activities, it's not reported as OPERATING ACTIVITIES, because it's treated as REMUNERATION or OWNER LOAN. Owner provide CAPITAL, when owner takes LOAN from business, it's reported under FINANCIAL ACTIVITIES.
In cash of withdrawn regularly, it's better to reported as OPERATING ACTIVITIES.
Income Statement does not effected by withdrawn by the owner / partner
CA. Gopi Vijayaragavan
(CA in Service)
(70 Points)
Replied 17 January 2012
Dear Tanuj,
Drawings from the business is purely of capital outflow. It is not connected with operations of the business in whatsoever manner whether the drawing is regular or irregular. Therefore, it shall be shown only under financing activity.
Pijush Roy
(ERP SAP Functional Tester)
(281 Points)
Replied 18 January 2012
1st follow my previous note...........
| Originally posted by : Pijush Roy | ||
 |
Cash Flow Statement is the mandatory for the Corporate Sector & generally Drawing is not made in the corporate sector. Drawing in case of proprietorship company, firms & withdrawn by proprietor / partner effect the company B/S & through the reduction of assets ( cash reduction in case of cash withdrawn, other asset reduction in cash of specific assets withdrawn) & reduction of owner equity. If Drawing in not regular activities, DRAWING reported as FINANCIAL Activities & use as OUTFLOW of cash (if other asset withdrawn except cash, it's not a part of CASH FLOW STATEMENT, it's reported as Supplementary Notes on the Statement of Cash Flow). If Drawing is not regular activities, it's not reported as OPERATING ACTIVITIES, because it's treated as REMUNERATION or OWNER LOAN. Owner provide CAPITAL, when owner takes LOAN from business, it's reported under FINANCIAL ACTIVITIES. In cash of withdrawn regularly, it's better to reported as OPERATING ACTIVITIES. Income Statement does not effected by withdrawn by the owner / partner |
 |
Operating Activities: - Operating activities are those activities which are recurring in nature & normal business activities.
Financial Activities: - Financial activities are those activities which are non-recurring in nature & not normal/daily business activities
There is some partnership or proprietorship firm which owner/partner withdrawn cash/assets per month according to their partnership deed. Sometimes they pay interest on such drawing. It's treated as their remuneration. It's recurring in nature & normal business activities. From this point of view, if drawing made in every month or after fixed time interval, it's operating activities, not financial.
steven786
(seo)
(22 Points)
Replied 19 January 2012
n financial accounting, a cash flow statement, also known as statement of cash flows orfunds flow statement,[1] is a financial statement that shows how changes in balance sheetaccounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
[url="www.settlement-cash-structured-for-flow.com"]settlement-cash-structured-for-flow[/url]
anushasuresh
(student)
(24 Points)
Replied 02 December 2012
what should be done when pnl appropriation account is given in comparative balancesheet.. pls help me out........wat should be done for share in subsidiary ... what should be effected for these items.............
K JAGABANDHU PATRO
(STUDENT)
(34 Points)
Replied 02 December 2012
it will shown under the head finance activity as capital outflow
anushasuresh
(student)
(24 Points)
Replied 02 December 2012
what should be dne for p n l appropriation account
Jag Bhushan Sharma
(Faculty in a B-School)
(633 Points)
Replied 03 December 2012
I would like to discuss point wise all the issues raised in the thread above.
1. Drawings - I think since drawings in a proprietory/partnership firm are done against the profits being earned, hence they should be treated as financing activity as is dividend paid treated in case of companies.
2. In case P&L Appropriation Account is given, you take the difference between the two dates and add to this whatever appropriations have been made like drawings, interest paid on capital etc. and proceed in the same manner as you proceed in case profit *& Loss A/c is given.
3. Share in a subsidiary should be shown as Investing Activities and not as financing activity because the shares held in a subsidiary are shown in the balance sheet as an asset.
I am attaching a link of my small clip on Accounting Equation for your kind FEEDBACK.
https://www.youtube.com/watch?v=_aSmU3Q-dX4
anushasuresh
(student)
(24 Points)
Replied 04 December 2012
i saw ppt regarding cashflow they put that share in subsidiary should not be shown as it is not between the company and investor in the companies ....................is that point okay ...do u agree with that
Recent Topics
- Making payment once in quarter possible under QRMP
- Master File Documentation related
- Applicability of 44AD needs clarification
- ITC reversal in GST 3B
- Claim if ITC on stocks 19-2020 conversion from com
- Urgent doubt on GST
- Profit or Loss on Sale of Assets Accounting treatm
- Clarification on RCM on Rent Payment for QRMP Deal
- Reclaimed itc in gstr9
- Gamification in Accounting Software: Boosting Enga
Related Threads
CAclubindia
