On the statement of cash flows there are line items including “paid” within them. Considering that the period for which the statement is prepared for is long and your company does various transactions over the year, picking out for an example all interest payments from the bank account abstract isn’t really efficient. But then how do you reach to for an example “paid interest” amount?

The logic is fairly simple when you think about it. Your beginning or brought forward balance is something you would expect to pay during the current period. In addition, you have current period expense as well, from which you’d again expect that part is already paid during the period. So you simply add them up. To bring you an example:

- Brought forward interest payable balance on the balance sheet: 50
- Interest expense on the income statement for the reporting period: 200

So the total you would expect to pay during the reporting period is 250. Now obviously not all of this is an actual paid amount and part of it you would have within the period end interest payable account.

To continue with our example, let’s say that out of this 250 the unpaid amount is 60. This 60 is your period end interest payable liability. Now to sum it up, the math looks like this:

Brought forward interest payable 50 + interest expense 200 – carried forward interest payable 60 = paid interest during the reporting period 190.

You add up the balances you expect to be paid during the period and then take from it the unpaid balance to reach to an actual paid amount.