Doubt ?? Mgmt of Working Capital.

I am just giving the part of the question. Question is related to requirement of working capital.

 

Que.)

Material consumed (Suppliers credit 2 months) - 6,00,000

The company keeps one month stock of raw material.

 

I have doubt in treatment of Creditors only. I have two treatments

-------------------------------------------------------------------------------------

I)

Current Assets

- Stock of Raw material - 50,000

{6,00,000 / 12}

 

Current Liabilities

- Creditor for goods - 1,00,000

{ (6,00,000 / 12) x 2 } 

--------------------------------------------------------------------------------

II)

Current Assets

- Stock of Raw material - 50,000

{6,00,000 / 12}

 

Current Liabilities

- Creditor for goods - 1,08,333

{ (6,50,000 / 12) x 2 } 

[Because total goods purchased should be Material consumed (6,00,000) + Cl. St. of Raw Material (50,000)]

--------------------------------------------------------------------------------

 

Which one is correct ?? Please help

Replies (1)

cl stock is added (in case of no.2 choice) when the company formed is a new company,a new co. doesnt have any op stock so u have to add cl stock to raw material consumed

in case of ur no.1 choice the assumption  is that the co.'s op stock and cl.stock is same so u dont add cl.stock to raw material consumed

 

any more problems send me pm

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