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Dipl. Experte in Rechnungslegung und Controlling - independent subject foundations study materials
Dipl. Experte in Rechnungslegung und Controlling - independent subject foundations study resources

Dipl. Experte in Rechnungslegung und Controlling - independent subject foundations practice questions

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Question 1Double entry, reconciliation, errors and recording models

The accounting equation is correctly stated as:

  1. Assets = Liabilities − Equity
  2. Assets + Liabilities = Equity
  3. Assets = Liabilities + Equity Correct answer.
  4. Assets = Equity − Liabilities

Explanation

The fundamental accounting equation is Assets = Liabilities + Equity. Every transaction must keep this equation in balance. Rearrangements that subtract liabilities from equity or add liabilities to assets misstate the relationship.

Question 2Double entry, reconciliation, errors and recording models

Which book of prime entry is used to record credit sales of goods?

  1. Purchases day book
  2. Cash book
  3. Petty cash book
  4. Sales day book Correct answer.

Explanation

Credit sales are listed in the sales day book (sales journal) before posting to the receivables ledger and sales account. The purchases day book records credit purchases; the cash book records cash and bank receipts and payments; the petty cash book records small cash disbursements.

Question 3Double entry, reconciliation, errors and recording models

Under the imprest system of petty cash, the amount reimbursed at the period end equals:

  1. The total of petty cash vouchers paid since the last reimbursement Correct answer.
  2. The original float plus receipts
  3. The cash remaining in the tin
  4. The bank balance per the cash book

Explanation

Under the imprest system the petty cashier starts with a fixed float. Reimbursement restores the float by equalling the vouchers paid, so cash on hand plus vouchers again equals the imprest amount. Remaining cash alone is not the reimbursement; bank balances are unrelated.

Question 4Double entry, reconciliation, errors and recording models

A machine costs GH¢40,000, has residual value GH¢4,000 and a useful life of 6 years. Annual straight-line depreciation is:

  1. GH¢6,667
  2. GH¢7,333
  3. GH¢6,000 Correct answer.
  4. GH¢4,000

Explanation

Straight-line depreciation = (cost − residual value) ÷ useful life = (40,000 − 4,000) ÷ 6 = 36,000 ÷ 6 = GH¢6,000 per year. Using cost alone without residual value, or dividing by the wrong life, produces the distractors.

Question 5Double entry, reconciliation, errors and recording models

An asset costing GH¢20,000 is depreciated at 25% per annum on the reducing-balance method. Accumulated depreciation after two full years is:

  1. GH¢5,000
  2. GH¢10,000
  3. GH¢7,500
  4. GH¢8,750 Correct answer.

Explanation

Year 1 charge = 25% × 20,000 = 5,000; carrying amount 15,000. Year 2 charge = 25% × 15,000 = 3,750. Accumulated depreciation = 5,000 + 3,750 = GH¢8,750. Straight-line cumulative or single-year figures produce the wrong options.

Question 6Double entry, reconciliation, errors and recording models

Under IAS 2 Inventories, inventories are measured at:

  1. The lower of cost and net realisable value Correct answer.
  2. Historical cost only
  3. Net realisable value only
  4. Replacement cost

Explanation

IAS 2 requires inventories to be measured at the lower of cost and net realisable value (NRV). Using cost alone can overstate assets when NRV has fallen; using NRV alone when cost is lower would understate; replacement cost is not the IAS 2 measurement basis.

Question 7Double entry, reconciliation, errors and recording models

Inventory cost is GH¢12,000. Estimated selling price is GH¢11,500 and selling costs are GH¢800. At what amount should inventory be reported?

  1. GH¢12,000
  2. GH¢10,700 Correct answer.
  3. GH¢11,500
  4. GH¢11,200

Explanation

NRV = selling price − costs to sell = 11,500 − 800 = 10,700. Inventory is the lower of cost (12,000) and NRV (10,700), so it is reported at GH¢10,700. Reporting cost or selling price alone ignores the NRV write-down rule.

Question 8Double entry, reconciliation, errors and recording models

Rent of GH¢36,000 for the year was paid on 1 April for the year to 31 March. At the 31 December year-end, the prepayment is:

  1. GH¢27,000
  2. GH¢36,000
  3. GH¢12,000
  4. GH¢9,000 Correct answer.

Explanation

The payment covers 12 months from 1 April to 31 March. By 31 December, 9 months (April–December) have been consumed and 3 months (January–March) remain prepaid: 3/12 × 36,000 = GH¢9,000. The expense for the nine months is GH¢27,000.

Question 9Double entry, reconciliation, errors and recording models

Electricity bills are paid one month in arrears. Annual bills total GH¢24,000 and the year-end is 31 December. If December's bill of GH¢2,200 is unpaid, the accrual at 31 December is:

  1. GH¢2,200 Correct answer.
  2. GH¢24,000
  3. GH¢2,000
  4. GH¢0 because bills are always paid later

Explanation

An accrual recognises expense incurred but not yet paid. December's unpaid bill of GH¢2,200 is a year-end accrual (current liability) and is added to electricity expense. The annual total alone is not the accrual; averaging ignores the known unpaid amount.

Question 10Double entry, reconciliation, errors and recording models

Which source document supports a credit purchase of inventory?

  1. Sales invoice issued by the entity
  2. Purchase invoice received from the supplier Correct answer.
  3. Credit note issued to a customer
  4. Petty cash voucher

Explanation

A purchase invoice from the supplier evidences a credit purchase and is recorded in the purchases day book. The entity's own sales invoice evidences a sale; a credit note to a customer relates to sales returns; a petty cash voucher supports a small cash payment.

Question 11Double entry, reconciliation, errors and recording models

When a non-current asset is purchased for cash, the double entry is:

  1. Debit cash; credit non-current asset
  2. Debit expenses; credit non-current asset
  3. Debit non-current asset; credit cash Correct answer.
  4. Debit non-current asset; credit equity

Explanation

Capitalising a cash purchase increases the asset (debit) and decreases cash (credit). Debiting cash would reverse the cash effect; charging expense immediately treats capital expenditure as revenue; crediting equity invents an owner contribution that did not occur.

Question 12Double entry, reconciliation, errors and recording models

A credit note received from a supplier for returned goods is recorded in the:

  1. Sales returns day book
  2. Purchases returns day book Correct answer.
  3. Sales day book
  4. Petty cash book

Explanation

Returns of goods previously purchased on credit are recorded in the purchases returns (returns outwards) day book, reducing purchases and payables. Sales returns relate to goods the entity sold; the sales day book records credit sales; petty cash is unrelated.

Question 13Double entry, reconciliation, errors and recording models

Trade receivables control account balances are agreed to:

  1. The list of individual customer balances in the sales ledger Correct answer.
  2. The purchases day book totals only
  3. Share capital in the statement of financial position
  4. The petty cash imprest amount

Explanation

The receivables (sales ledger) control account in the general ledger should reconcile to the sum of individual customer balances in the sales ledger. Purchases day book totals relate to payables; share capital and petty cash are unrelated control checks.

Question 14Double entry, reconciliation, errors and recording models

Carriage inwards on inventory purchases is normally treated as:

  1. An administrative expense only
  2. A deduction from sales revenue
  3. A non-current asset
  4. Part of the cost of inventory / purchases Correct answer.

Explanation

Carriage inwards (freight on purchases) is part of bringing inventory to its present location and condition, so it is included in inventory cost / purchases under IAS 2 principles. Carriage outwards is typically a selling expense; it is not a sales deduction or a non-current asset.

Question 15Double entry, reconciliation, errors and recording models

Depreciation for the year is recorded by:

  1. Debit accumulated depreciation; credit depreciation expense
  2. Debit non-current asset cost; credit cash
  3. Debit depreciation expense; credit accumulated depreciation Correct answer.
  4. Debit equity; credit depreciation expense

Explanation

The periodic depreciation entry debits depreciation expense (profit or loss) and credits accumulated depreciation (a contra-asset). Crediting expense and debiting accumulated depreciation reverses the entry; adjusting cost directly is not the usual presentation; equity is not debited for routine depreciation.

Question 16Double entry, reconciliation, errors and recording models

A sole trader introduces additional capital of GH¢15,000 by cheque. The entry is:

  1. Debit capital; credit bank
  2. Debit drawings; credit bank
  3. Debit bank; credit capital Correct answer.
  4. Debit bank; credit sales

Explanation

Capital introduced increases the bank asset (debit) and increases owner's capital (credit). Debiting capital would reduce equity incorrectly; drawings reduce capital when cash leaves the business; crediting sales would misclassify a capital injection as revenue.

Question 17Double entry, reconciliation, errors and recording models

An allowance for doubtful debts is increased by GH¢1,500. The effect on profit for the year is:

  1. Increase profit by GH¢1,500
  2. Decrease profit by GH¢1,500 Correct answer.
  3. No effect on profit
  4. Increase assets by GH¢1,500

Explanation

An increase in the allowance is charged as an expense (or as part of impairment of receivables), reducing profit by GH¢1,500. It also increases the allowance contra, reducing net receivables - it does not increase assets or leave profit unchanged.

Question 18Double entry, reconciliation, errors and recording models

FIFO inventory valuation assumes that:

  1. The oldest units are sold first Correct answer.
  2. The newest units are sold first
  3. Average cost is always used
  4. Units cannot be identified

Explanation

FIFO (first-in, first-out) assumes the oldest purchases are issued/sold first, so closing inventory reflects more recent costs. LIFO assumes newest first (not permitted under IAS 2); weighted average uses average cost; specific identification is used when items are distinguishable.

Question 19Double entry, reconciliation, errors and recording models

Which ledger typically contains the individual personal accounts of credit customers?

  1. General ledger only
  2. Purchases (payables) ledger
  3. Nominal ledger cash book only
  4. Sales (receivables) ledger Correct answer.

Explanation

The sales (receivables) ledger holds individual customer accounts. The purchases ledger holds supplier accounts. The general/nominal ledger holds impersonal accounts and control totals; the cash book records cash and bank.

Question 20Double entry, reconciliation, errors and recording models

A machine costing GH¢50,000 with accumulated depreciation GH¢30,000 is sold for GH¢18,000 cash. The profit or loss on disposal is:

  1. GH¢18,000 profit
  2. GH¢12,000 profit
  3. GH¢20,000 loss
  4. GH¢2,000 loss Correct answer.

Explanation

Carrying amount = 50,000 − 30,000 = 20,000. Proceeds 18,000 give a loss of GH¢2,000. Treating proceeds as profit ignores carrying amount; comparing proceeds only to cost or accumulated depreciation produces the other wrong figures.

Question 21Double entry, reconciliation, errors and recording models

An error of principle occurs when:

  1. A transaction is completely omitted from the books
  2. Two equal and opposite errors cancel in the trial balance
  3. A transaction is posted to the wrong class of account (e.g. capital vs revenue) Correct answer.
  4. Figures are transposed when writing an amount

Explanation

An error of principle posts a transaction to the wrong type of account - for example treating capital expenditure as an expense. Omission leaves the transaction out entirely; compensating errors cancel each other; transposition is a form of error of original entry / casting.

Question 22Double entry, reconciliation, errors and recording models

Which error will NOT cause a trial balance disagreement?

  1. Posting only one side of a double entry
  2. An error of omission of an entire transaction Correct answer.
  3. Adding the debit column incorrectly
  4. Recording unequal debit and credit amounts

Explanation

Omitting a transaction entirely means both debit and credit are missing, so the trial balance can still agree. One-sided postings, incorrect casting, and unequal amounts cause the trial balance to disagree and may require a suspense account.

Question 23Double entry, reconciliation, errors and recording models

A purchase of GH¢900 was entered in both the purchases account and the supplier account as GH¢90. This is an error of:

  1. Original entry Correct answer.
  2. Omission
  3. Commission
  4. Principle

Explanation

Both sides used the same incorrect amount from the source, so it is an error of original entry. Omission would leave it out; commission posts to the wrong personal account of the same class; principle posts to the wrong class of account.

Question 24Double entry, reconciliation, errors and recording models

A suspense account is primarily used to:

  1. Hold a trial-balance difference until errors are found and corrected Correct answer.
  2. Record drawings of the owner
  3. Replace the cash book permanently
  4. Measure goodwill on partnership admission

Explanation

When the trial balance disagrees, the difference is posted to a suspense account so books can proceed; correcting journals clear suspense as errors are found. It is not a drawings, cash-book or goodwill account.

Question 25Double entry, reconciliation, errors and recording models

A cheque for GH¢4,500 issued to a supplier is still unpresented at the bank statement date. When reconciling from the bank statement balance to the cash-book balance, this cheque is:

  1. Added to the bank statement balance
  2. Ignored because it has cleared
  3. Added to cash-book receipts
  4. Deducted from the bank statement balance Correct answer.

Explanation

Unpresented cheques have been recorded as payments in the cash book but not yet cleared by the bank. Starting from the higher bank-statement balance, deduct unpresented cheques (and add outstanding lodgements) to agree to the cash book. They are not ignored, added to the statement balance, or treated as receipts.

Question 26Double entry, reconciliation, errors and recording models

Outstanding lodgements (deposits in transit) at the reconciliation date are:

  1. Cheques recorded by the bank but not in the cash book
  2. Direct debits on the bank statement
  3. Receipts recorded in the cash book but not yet on the bank statement Correct answer.
  4. Bank charges only

Explanation

Outstanding lodgements are amounts already entered as receipts in the entity's cash book that have not yet appeared on the bank statement. Bank-only items such as direct debits or charges appear on the statement first and require cash-book updates.

Question 27Double entry, reconciliation, errors and recording models

Bank charges of GH¢120 appear on the bank statement but not in the cash book. The correcting cash-book entry is:

  1. Debit bank; credit bank charges expense
  2. Debit bank charges expense; credit bank Correct answer.
  3. Debit suspense; credit bank
  4. No entry is required

Explanation

Bank charges reduce the bank balance and create an expense: debit bank charges expense, credit bank (cash book). Debiting bank would increase the balance incorrectly; suspense is unnecessary once the item is identified; an entry is required to update the cash book.

Question 28Double entry, reconciliation, errors and recording models

A sales invoice of GH¢2,000 was posted to the wrong customer's account in the sales ledger. This is an error of:

  1. Omission
  2. Principle
  3. Commission Correct answer.
  4. Compensating error

Explanation

Posting to the wrong personal account within the same class (wrong customer) is an error of commission. Both receivables still agree in total if the amount is correct, so the control account and trial balance may still agree. Principle involves wrong class; omission leaves it out.

Question 29Double entry, reconciliation, errors and recording models

The receivables control account shows GH¢48,000 but the sales ledger list totals GH¢46,500. A credit note of GH¢1,500 was entered in a customer account but not in the control account. After correction, the control balance should be:

  1. GH¢46,500 Correct answer.
  2. GH¢48,000
  3. GH¢49,500
  4. GH¢45,000

Explanation

Failing to post the credit note to the control account left control GH¢1,500 too high (48,000). Crediting control with GH¢1,500 brings it to GH¢46,500, matching the list of balances. Increasing control further or ignoring the credit note leaves the difference.

Question 30Financial statements, assets, inventory and cash-flow models

Under the IFRS Conceptual Framework, which pair are the two fundamental qualitative characteristics of useful financial information?

  1. Relevance and faithful representation Correct answer.
  2. Comparability and verifiability
  3. Timeliness and understandability
  4. Prudence and consistency

Explanation

The Conceptual Framework identifies relevance and faithful representation as the two fundamental qualitative characteristics. Comparability, verifiability, timeliness and understandability are enhancing characteristics that improve usefulness but are not themselves fundamental.

Question 31Financial statements, assets, inventory and cash-flow models

Which user of financial statements is primarily interested in an entity's ability to pay dividends and the security of their investment?

  1. Trade payables
  2. Equity investors (shareholders) Correct answer.
  3. Employees seeking wage negotiations
  4. Tax authorities such as the GRA

Explanation

Equity investors need information about returns - including dividends - and about whether the entity can generate cash and preserve capital. Trade payables focus on short-term payment capacity; employees on employment security and pay; tax authorities on taxable profits.

Question 32Financial statements, assets, inventory and cash-flow models

According to the Conceptual Framework, which of the following meets the definition of an asset?

  1. An obligation to transfer economic resources as a result of past events
  2. A residual interest in the assets after deducting liabilities
  3. A present economic resource controlled by the entity as a result of past events Correct answer.
  4. Increases in economic benefits during the period other than owner contributions

Explanation

An asset is a present economic resource controlled by the entity as a result of past events. An obligation to transfer resources is a liability; residual interest after liabilities is equity; increases in benefits other than owner contributions describe income.

Question 33Financial statements, assets, inventory and cash-flow models

Which IESBA / ICAG fundamental ethical principle requires a professional accountant not to compromise professional or business judgements because of bias, conflict of interest or undue influence?

  1. Integrity
  2. Confidentiality
  3. Professional behaviour
  4. Objectivity Correct answer.

Explanation

Objectivity requires accountants not to compromise judgement because of bias, conflict of interest or undue influence of others. Integrity is about honesty and straightforwardness; confidentiality about not disclosing information; professional behaviour about complying with laws and avoiding discredit.

Question 34Financial statements, assets, inventory and cash-flow models

How does financial accounting primarily differ from management accounting?

  1. Financial accounting never uses double-entry; management accounting always does
  2. Financial accounting reports mainly to external users using prescribed frameworks; management accounting serves internal decision-makers Correct answer.
  3. Financial accounting ignores monetary measurement; management accounting is only monetary
  4. Financial accounting is illegal for private companies; management accounting is mandatory

Explanation

Financial accounting focuses on general-purpose reports for external users under frameworks such as IFRS, while management accounting produces internal information for planning and control. Both can use double-entry and monetary measurement; neither is illegal or uniquely mandatory in the way the distractors claim.

Question 35Financial statements, assets, inventory and cash-flow models

Closing inventory is accounted for by:

  1. Debiting cost of sales and crediting inventory
  2. Debiting drawings and crediting inventory
  3. Debiting inventory and crediting cost of sales (or purchases via closing inventory) Correct answer.
  4. Ignoring inventory until sold in a later year only

Explanation

Closing inventory is recognised as a current asset (debit inventory) and reduces cost of sales / is credited in the trading account. Debiting cost of sales would increase expense incorrectly; drawings are owner withdrawals; inventory must be recognised at year-end under the accruals concept.

Question 36Financial statements, assets, inventory and cash-flow models

In a sole trader's statement of financial position, net assets equal:

  1. Total assets only
  2. Liabilities only
  3. Sales revenue for the year
  4. Capital (opening capital + profit − drawings + capital introduced) Correct answer.

Explanation

Net assets (assets minus liabilities) equal owner's capital. Capital is explained as opening capital plus profit (or minus loss), minus drawings, plus capital introduced. Total assets ignore liabilities; liabilities alone and sales revenue are not capital.

Question 37Financial statements, assets, inventory and cash-flow models

In this ordinary-equity classroom model, how are dividends paid on non-redeemable ordinary shares presented?

  1. An expense in profit or loss before tax
  2. A distribution deducted from retained earnings in equity Correct answer.
  3. A non-current asset
  4. Revenue in other income

Explanation

Dividends are appropriations of profit, deducted from retained earnings within equity, not expenses in arriving at profit before tax. They are neither assets nor revenue.

Question 38Financial statements, assets, inventory and cash-flow models

In company accounts, directors' salaries are normally treated as:

  1. An appropriation of profit after tax
  2. A deduction from share premium only
  3. An expense in arriving at profit Correct answer.
  4. Part of share capital

Explanation

Directors' remuneration for services is an expense charged in arriving at profit. Dividends are appropriations; share premium and share capital are equity accounts, not the place to charge salaries.

Question 39Financial statements, assets, inventory and cash-flow models

Gross profit is calculated as:

  1. Sales − cost of sales Correct answer.
  2. Sales − operating expenses
  3. Sales − drawings
  4. Assets − liabilities

Explanation

Gross profit equals sales (net of returns) minus cost of sales. Deducting operating expenses gives a lower profit measure (e.g. operating profit); drawings and net assets are capital/position concepts, not gross profit.

Question 40Financial statements, assets, inventory and cash-flow models

Carriage outwards is usually classified as:

  1. Part of cost of sales / purchases
  2. A deduction from share capital
  3. An intangible asset
  4. A selling and distribution expense Correct answer.

Explanation

Carriage outwards (delivery to customers) is a selling/distribution expense. Carriage inwards on purchases forms part of inventory/purchases cost. It is not a capital deduction or an intangible asset.

Question 41Financial statements, assets, inventory and cash-flow models

A basic statement of cash flows classifies cash flows into:

  1. Assets, liabilities and equity only
  2. Debits and credits only
  3. Gross profit and net profit only
  4. Operating, investing and financing activities Correct answer.

Explanation

IAS 7 structures the statement of cash flows into operating, investing and financing activities. Assets/liabilities/equity are statement-of-financial-position elements; debits/credits are bookkeeping; gross/net profit are performance measures.

Question 42Financial statements, assets, inventory and cash-flow models

Share premium arises when:

  1. Shares are issued at a price above nominal (par) value Correct answer.
  2. The company pays a dividend
  3. Inventory is revalued downwards
  4. Directors declare a bonus to themselves

Explanation

Share premium is the excess of issue proceeds over the nominal value of shares issued, presented in equity. Dividends reduce retained earnings; inventory write-downs affect profit/inventory; directors' bonuses are expenses or appropriations as applicable - none create share premium.

Question 43Financial statements, assets, inventory and cash-flow models

Opening inventory GH¢8,000, purchases GH¢52,000, closing inventory GH¢10,000. Cost of sales is:

  1. GH¢54,000
  2. GH¢70,000
  3. GH¢50,000 Correct answer.
  4. GH¢42,000

Explanation

Cost of sales = opening inventory + purchases − closing inventory = 8,000 + 52,000 − 10,000 = GH¢50,000. Adding closing inventory or omitting opening inventory produces the distractors.

Question 44Financial statements, assets, inventory and cash-flow models

Accrued expenses at year-end appear in the statement of financial position as:

  1. Current assets
  2. Current liabilities Correct answer.
  3. Equity
  4. Non-current assets

Explanation

Accrued expenses are obligations for goods/services received but not yet paid, classified as current liabilities. They are not assets or equity.

Question 45Financial statements, assets, inventory and cash-flow models

Prepayments at year-end appear as:

  1. Current liabilities
  2. Long-term borrowings
  3. Current assets Correct answer.
  4. Share capital

Explanation

Prepayments are amounts paid for benefits not yet consumed, recognised as current assets and reducing the related expense. They are not liabilities, borrowings or share capital.

Question 46Financial statements, assets, inventory and cash-flow models

Sales GH¢200,000, cost of sales GH¢120,000, operating expenses GH¢45,000. Profit for the year (ignore tax) is:

  1. GH¢80,000
  2. GH¢35,000 Correct answer.
  3. GH¢155,000
  4. GH¢45,000

Explanation

Gross profit = 200,000 − 120,000 = 80,000. Profit for the year = 80,000 − 45,000 = GH¢35,000. Stopping at gross profit, adding expenses, or reporting expenses alone is incorrect.

Question 47Financial statements, assets, inventory and cash-flow models

Irrecoverable (bad) debts written off are recorded by:

  1. Debit trade receivables; credit bad debts expense
  2. Debit bank; credit bad debts expense
  3. Debit equity; credit bank
  4. Debit bad debts expense; credit trade receivables Correct answer.

Explanation

Writing off a specific bad debt expenses it and removes the receivable: debit bad debts expense, credit trade receivables. Debiting receivables would increase the asset incorrectly; bank and equity are not the usual counterparties for a pure write-off.

Question 48Financial statements, assets, inventory and cash-flow models

In a company's statement of financial position, retained earnings represent:

  1. Cumulative profits not distributed as dividends (adjusted for losses and other equity movements) Correct answer.
  2. Cash held in the bank only
  3. The nominal value of shares issued
  4. Trade payables

Explanation

Retained earnings are accumulated profits less distributions and losses (and other permitted equity adjustments). They are not equal to cash, share nominal value, or trade payables.

Question 49Financial statements, assets, inventory and cash-flow models

Purchase of a delivery van for cash is classified in the statement of cash flows as:

  1. Investing cash outflow Correct answer.
  2. Operating cash outflow
  3. Financing cash inflow
  4. Not a cash flow

Explanation

Buying PPE is an investing activity cash outflow under IAS 7. Operating flows relate to trading; financing relates to owners and lenders; a cash purchase is clearly a cash flow.

Question 50Financial statements, assets, inventory and cash-flow models

Issue of ordinary shares for cash is classified as:

  1. Operating activity
  2. Financing activity Correct answer.
  3. Investing activity
  4. An expense in profit or loss

Explanation

Cash proceeds from issuing shares are financing cash inflows. They are not operating or investing flows, and an equity issue is not an expense in profit or loss.