Calculation of average capital employed

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Sugandha (Querist)
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22 April 2015 Sir

Kindly answer my query.
While calculating Rectified PAT (to find out avg. Capital employed) Why don't we consider
overvaluation of Stock , despite of the fact that it is an error.
Also, please clarify what is the logic behind this formula of deducting 1/2 Rectified PAT from closing Capital Employed to arrive at average capital employed.

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)
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22 April 2015
1/2 pat is deducted because u need average capital employed....

and full pat means profit for the year.. to make it average we divide it by 2

so that the final calculation of average capital empl. wil b more near to perfect

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CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)
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22 April 2015 overvaluation wil not effect the average capital employed... thats why we ignore this

Sugandha

Sugandha (Querist)
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22 April 2015 Sir

Why Overvaluation of closing stock not considered as an error while calculating rectified PAT???
Please Explain.
Also , clarify what kind of rectifications are we talking about here??

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)
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23 April 2015 because this required error wil have two effect.. one for addition one for deletion in opening and closing stock... so u can ignore that

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Sugandha

Sugandha (Querist)
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24 April 2015 Thanks Sir for Clarifying my doubt.

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)
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24 April 2015 your welcome.. while replying thnks in querries in expert section.. do close the querry dear...

All the best

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