CFAT Query-- Release of working capital
This query is : Resolved
25 August 2010
Why we add back release of working capital at the end of useful life of an asset to CFAT?? Why we add that inspite of the fact that at the end only salvage value is realised in cash?
25 August 2010
Working capital is not a cost of asset. it is included in first year as this WC will be kept invested till the useful life of the asset. After end of the useful ife of the asset this WC will be realesed from such asset or project. so againg it is considered as inflow. So ultimate effect of this would be only notional interest portion which we lost due to investment of WC in this asset at discounting rate.
Salvage value is the amt. which we will get by disposing off the asset at the end of useful life of the asset only it doesnot include WC investment made in 1st year.
Salvage value is the amt. which we will get by disposing off the asset at the end of useful life of the asset only it doesnot include WC investment made in 1st year.
Message likes :
1 times
25 August 2010
Ok but how we recover back WC at the end or how WC comes into picture in that project life?? Why there is a need to invest WC for a long term project?? How such WC investments is made in long term assets?
25 August 2010
I have already said that WC is not cost to project.. WC is a amount which is used for maintainance of asset or project e.g. loose tools, debtors & creditors which are specifically related to such project, any advance which is required to paid to seller of assets as deposit. so these is considered as WC, which is going to be realised at the end of life of project. Consider best example like some deposite is required to be given to government to obtaing license for project, which will be refunded when project gets over.
Message likes :
1 times
01 September 2010
Thnx for clarifying my doubt.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Fixe term employment
- Is any professional CA is here please reply
- Gift Received from nonblood relative
- EXPORT BILL UNDER LUT FREIGHT CHARGE INCLUED IN INVOICE IT LIABLE TO TAX
- Reprocessing of rectification order AY 2025-26
- FTS Taxable under 115A
- Putting a heading on received mail
- Experts need help
- Foreign lottery ticket bought online from India: legality, tax and consequences
- Tax Audit u/s 44AB for Transport Business A proprietorship is engaged in transportation business and
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- STATUTORY AUDIT OF A SMALL PRIVATE COMPANY INCORPORATED ON 28.03.2025
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
- How to pay remaining amount of TDS after due date?
- Resigning a auditor from the company for misconduct
- RCM @ 5% on Hamali charges, Transport Charges, Unloading charges we take ITC or not
- CALCULATION OF DEFFERED TAX - OP BL IS DTL & CURRET IT DTA
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
