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SFM Ch 8 PM

19 February 2018

I have a doubt in Sum No. 10 of PM
interest on Reduction in receivables Rs. 76301 is considered as saving Why?
Please explain

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2 Replies

Virginie marie (Executive Corporate Secretary) (36 Points)
Replied 19 February 2018

Hi, Company would incur over draft finance cost (Interest), if it does not opt for Factoring Proposal. If the Company accepts the Factoring Proposal, it will not use overdraft facility and hence the interest charges on overdraft would be saved. Therefore, It is treated as saving. Hope u understood.

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Kajal Hiranandani (50 Points)
Replied 20 February 2018

Thank you for your reply and yes I got this but in this sum company is receiving less amount by 1526027 if they opt for factoring so they have to borrow this much less money and have to pay interest on it so how they saved? This is my doubt. Please make me correct