KP - Practice Question 5

Hi All,

Can you please help me to understand this a little bit?

In the attached Practice question, Dividends received are deducted from Operating activities and added back in the investing activities section, can somebody please explain why is it in both sections, I thought that dividends received for the AAT exam should be treated as investing activities?

Finance cost - is added back in the operating section, but is also included in the Cash generated by operation (W2) - can somebody please explain why it appears in both parts, I thought that interest paid should be only in the Cash generated by operations?

Many thanks in advance for your help!!!

Comments

  • Pian32Pian32 Registered Posts: 33
    It's due to where they are in the P+L statement. You are correct that you don't want them in the operating activiteies but as you start from the later profit statements they are included and need to be removed.

    Profit from operations for example includes the dividends received in the question.
    Similarly for the finance cost you have to add it back in the earlier section to remove it and then put it back in where appropiate.
  • ZanaZana AAT Student Posts: 17
    Thank you @Pian32!
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