Introduction:
The cash flow statement is an important financial statement that provides information about the cash inflows and outflows of a company during a specific period. It helps in understanding the cash position and cash-generating ability of the company. One of the components of the cash flow statement is the interest paid on debentures. The interest paid on debentures is calculated based on the previous year's figures, and there are several reasons for this approach.

Reasons for calculating interest paid on debenture on previous year:

1. Accrual Basis of Accounting:
The interest paid on debentures is calculated on an accrual basis of accounting. According to the accrual basis, expenses are recognized when they are incurred, regardless of when the cash is actually paid. This ensures that the financial statements reflect the economic reality of the transactions. By calculating the interest expense based on the previous year's figures, the company adheres to the accrual basis of accounting.

2. Matching Principle:
The matching principle is a fundamental accounting concept that requires expenses to be matched with the revenues they help generate. In the case of debentures, the interest expense is incurred to finance the operations of the company. Therefore, it is essential to match the interest expense with the revenues earned during the same period. By using the previous year's figures, the company ensures that the interest expense is allocated to the correct period and matches with the corresponding revenues.

3. Consistency and Comparability:
Consistency and comparability are crucial factors in financial reporting. By consistently calculating the interest paid on debentures based on the previous year's figures, the company ensures that the cash flow statement is comparable across different periods. This allows users of the financial statements to analyze trends and make informed decisions. It also promotes transparency and reduces the potential for manipulation of financial information.

4. Cash Flow Timing:
Calculating the interest paid on debentures based on the previous year's figures helps in the accurate presentation of cash flows. Cash flows are classified into operating, investing, and financing activities in the cash flow statement. By using the previous year's figures, the interest paid on debentures is categorized as a financing activity, reflecting the actual cash outflow during that period.

Conclusion:
The interest paid on debentures is an important component of the cash flow statement. By calculating it based on the previous year's figures, the company adheres to the accrual basis of accounting, matches expenses with revenues, ensures consistency and comparability, and accurately presents cash flows. This approach provides users of the financial statements with relevant and reliable information for decision-making and analysis.