What is the treatment of general reserve in cash flow statement?
Answer: General reserves are the part of Profit and Loss Appropriation Account. The creation of general reserve is non cash item and is created through provision. Therefore, as per clause (b) of Para 20 of IAS 7 – Cash Flow statement, in the cash flow from the operating activities, all provisions and non cash ite…
What happens to General reserve in cash flow statement?
12 February 2013 The creation of general reserve is non cash item and is created through provision. Therefore, as per clause (b) of Para 20 of IAS 7 – Cash Flow statement, in the cash flow from the operating activities, all provisions and non cash items are adjusted to the net profit and loss.
How reserve and surplus is treated in cash flow statement?
➡The funds constituting the capital reserve account are not used to pay dividends, repurchase shares or engage in other capital return programs. So, No Treatment needs to be carried out in Cash Flow Statement for Capital Reserve. The gain on sale of fixed asset is transferred to capital reserve .
What is the accounting treatment of General reserve?
In accounting, the reserves are recorded by debiting the retained earnings account and then crediting the same amount to the reserve account. After the activity which caused the reserve to be created has been completed, the entry is to be reversed by shifting the balance back to the retained earnings account.
What is the treatment of extraordinary items in cash flow statement?
Extraordinary items are non-recurring in nature and hence cash flows associated with extraordinary items should be classified and disclosed separately as arising from operating, investing or financing activities.
Is general reserve recorded in profit and loss account?
This general reserve will be considered as part of the profit and loss appropriation account of the company. It will be shown under the head ‘reserves and surplus’ on the liabilities side of the balance sheet of the company.
How do you treat provision for taxation and proposed dividends in fund flow statement?
Item # 2. Like provision for taxation, proposed dividend may be treated either as an item of current liability or an item of appropriation of profit. If, proposed dividend is treated as a current liability, it will appear as one of the item, decreasing working capital in the schedule of changes in working capital.
How do you write off preliminary expenses?
As stated above the preliminary expenses can be written off in five years, to record that following entry should be passed : Debit the Preliminary expenses written off the credit the preliminary expenses A/c with the amount which is equal to 1/5th of the total preliminary expense booked as per point no 1.
How will you treat payment of dividend in a cash flow statement?
The journal entries to record a cash dividend payment are to debit dividends payable, which removes the dividend liability from the balance sheet, and credit cash. Dividends are a cash outflow in the financing-activities section of the statement of cash flow. This reduces cash flow for the period by $50,000.