Capital expenditure

Capital expenditure

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In an investment over a five year period you were told that capital expenditure should be written off and a provision of x amount will be made for environmental damage at the end of the period.

Should you include the cash flow the equal amounts the capital expenditure is written off by as an expense before your profit?

How should you treat the provision that was made?

I am abit confused on how to handle the information set before me
Anon

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By rjwbailey
18th Oct 2007 10:06

Cash is cash
Neither write-off of capital expenditure nor provisions should be included on a cash flow analysis as they do not involve movement of cash.

The only cash movements are the purchase of the fixed asset for cash and the spending of the provision in cash.

Richard

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By User deleted
18th Oct 2007 14:52

What a question ?
I can only agree with the writer who queried the purpose of "Any answers" .

This student should go back to basics and read about the rules of a cash flow,and an Income & Expenditure account contrasted to a P & L account.

I hope it is a student and not someone in practice? If not heaven help us!

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