![]() The double entry is a credit to the revaluation surplus to reflect the gain and to debit the asset to reflect its increase The revaluation gain increases PPE without being a cash flow. The double entry for depreciation is a debit to statement of profit or loss to reflect the expense and to credit the asset to reflect its consumption. It is necessary to reconcile the opening tax liability to the closing tax liability to reveal the cash flow – the tax paid – as the balancing figure.ĭeprecation reduces the carrying amount of the PPE without being a cash flow. Required: Calculate the tax paid by Crombie Co for the year ended 31 December 20X1. The tax liability at 31 December 20X1 is $900 and the tax charged in the statement of profit or loss was $1,000. The following examples illustrate all three of these cases.Ĭrombie Co had a tax liability of $500 at 1 January 20X1. For example, when the opening balance of an asset, liability or equity item is reconciled to its closing balance using information from the statement of profit or loss and/or additional notes, the balancing figure is usually the cash flow.Ĭommon cash flow calculations include the tax paid (which is an operating activity cash outflow), the payment to buy property, plant and equipment (PPE) (which is an investing activity cash outflow), and dividends paid (which is a financing activity cash outflow). Computing cash flowsĬash flows are either receipts (ie cash inflows) and so are represented as a positive number in a statement of cash flows, or payments (ie cash outflows) and so are represented as a negative number in a statement of cash flows.Ĭash flows are usually calculated as a missing figure. Both the direct and indirect methods of preparing a statement of cash flows will be addressed in this article. This article considers the statement of cash flows, including how to calculate cash flows and where those cash flows are classified and presented in the statement of cash flows. ![]()
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