Depreciation in Cash Flow Statement:
Depreciation is treated at two places:
(1) Added while calculating Cash from Operating activities.
(2) Considered while preparing concerned asset account for calculating cash from/used in investing activities.
Preparation of Fixed Asset Account:
Simple abbreviations have been used for maintaining the simplicity of account without affecting the treatment, like: { I, O} mean Investing activities involving outflow of cash, { I, I } means investing activities involving inflow of cash, { O, A} means while calculating cash from Operating activities this item is to be added and vice-versa in case of { O,L}.
(1) When asset account is to be prepared at book value.
If asset appears in the Balance sheet at book value following entries appear in the asset account prepared for this purpose:
Dr. Asset Account (at Book Value) Cr.
| Particulars | ₹ | Particulars |
₹ |
| To Balance b/d(opening balance)To Profit & Loss profit)* {O, L}
To Bank-Purchase (bal.fig( { I, O} |
By Depreciation Account {O, A}By Bank-sale {I, I}
By Profit & Loss Account(loss) {O, A} By Balance c/d (closing Balance) |
||
| Total | Total |
Depreciation in Cash Flow Statement
(2) When asset account is to be prepared at Cost.
When asset appears at cost, there is another account which must be prepared, known as Accumulated depreciation account that appears in the Balance sheet. These are to be prepared as under:
Dr. Asset Account ( at Cost) Cr.
| Particulars | ₹ | Particulars |
₹ |
| To Balance b/d (opening balance)To Profit & Loss Acct. (profit)* {O, L}
To Bank-Purchase (bal.fig.) {I, O} |
By Acc. Depr. a/c (depr. on asset sold)By Bank-sale {I, I}
By Profit & Loss Account(loss) {O, A} By Balance c/d (closing Balance) |
||
| Total | Total |
Dr. Accumulated Depreciation Account Cr.
| Particulars | ₹ | Particulars |
₹ |
| To Asset Account (depr. on asset sold)To Balance c/d (Closing balance) | By Balance b/d (opening balance)By Profit & Loss Account (Depreciation charged during the year) {O, A} | ||
| Total | Total |
If Asset Disposal Account is to be prepared the above-mentioned accounts will appear as under along with asset disposal account:
Dr. Asset Account (at Cost) Cr.
| Particulars | ₹ | Particulars |
₹ |
| To Balance b/d (opening balance)To Bank-Purchase (bal.fig.) {I, O} | By Asset Disposal Account (cost of asset sold)By Balance c/d (closing Balance) | ||
| Total | Total |
Dr. Accumulated Depreciation Account Cr.
| Particulars | ₹ | Particulars |
₹ |
| To Asset Disposal Account Account (Depr. on asset sold)To Balance c/d (Closing balance) | By Balance b/d (opening balance)By Profit & Loss Account (Depreciation charged during the year) {O, A} | ||
| Total | Total |
Dr. Asset Disposal Account Cr.
| Particulars | ₹ | Particulars |
₹ |
| To Asset Account (cost of asset sold)To Profit & Loss Acct. (profit)* {O, L}
To Bank-Purchase (bal. fig.) {I, O} |
By Acc. Depr. a/c (depr.on asset sold)By Bank-sale{I,I}
By Profit & Loss Account(loss) {O, A} |
||
| Total | Total |
Treatment of Proposed Dividend in Cash Flow Statement