Answer to Question #99193 in Accounting for SabyKoles

Question

It has been mentioned that Claims received for loss of plant in fire is not cash flow. But isn't this an extraordinary Investing Activity Cash Inflow ? Also kindly explain how to treat 'Claim /amount received for loss of plant in fire' in Cash Flow Statement ?

Answer 1

Since inventory loss by fire is a non-recurring loss it will not be included in budgeting. But at the time of reporting variance has to be highlighted as unusual loss.

In cash flows inventory loss by fire included in operating activity . It has to be added back to the net profit since it is a non cash expense.