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Cash flow statement - Accounting

Comments

  • #2
    Steve!
    Registered Users, Registered Users 2 Posts: 39 ✭Steve!


    Interest paid is €13,000 seeing as €18,000 went into the P/L Account.


  • #3
    jimcoolding
    Closed Accounts Posts: 166 ✭✭jimcoolding


    Interest Paid (18000) - Abridged Profit and Loss
    Interest Due 5000 - Balance Sheet
    13000


  • #4
    **Timbuk2**
    Moderators, Education Moderators, Motoring & Transport Moderators Posts: 7,396 Mod ✭✭✭✭**Timbuk2**


    Nothing was due at the start of the year.
    18,000 was charged to the P/L (i.e. the company has 'clocked up' a charge of 18,000 in interest).

    If nothing was paid, this 18,000 would be a P/L expense (dr) and a Current Liability in the Balance Sheet (cr).

    However, all that is due at the end of the year is 5000. Thus, 13,000 must have been paid.

    So the final double entry would be
    dr Interest a/c 18,000
    cr Current Liab. ....... 5,000
    cr Bank a/c ............ 13,000

    (you don't need to show the final double entry, but it's just to get you understanding!)


  • #5
    **Timbuk2**
    Moderators, Education Moderators, Motoring & Transport Moderators Posts: 7,396 Mod ✭✭✭✭**Timbuk2**


    And you might as well understand the tax paid as well, since it's essentially the same method required.

    Note that there is tax due at the start of the year of 40,000. You have 'clocked up' a charge of 43,000 throughout this year. Thus, if no tax was actually paid, then there would be 83,000 due at the end of the year. But we can see from the balance sheet that only 45,000 is due at the end of the year. Therefore the difference 38,000 (83,000 - 45,000) is what was paid for tax.

    Once you understand where these figures are coming from, you can calculate interest and tax paid in the CFS questions as follows:

    (Bal due at the start of the year) + (charge for year) - (bal due at the end of the year).

    For the interest: 0 + 18,000 - 5000 = 13,000 paid
    For the taxation: 40,000 + 43,000 - 45,000 = 38,000 paid


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