IF trade receivable show (7150) in change in working capital...
Is it mean decreasing or increasing in Trade receivable???
10 Replies
mallikharjun
(Article Assistant)
(30 Points)
Replied 08 April 2018
If The Amount Is In Negative Then That Means Debtors i.e Trade Receivables Has Increased.
So In Your Case Trade Receivables Has Increased
Tech2abhi
(174 Points)
Replied 08 April 2018
how??
when we Sale on credit our debtor increases,which leads To block of cash Hence negative cash balance...
In above question negative cash balance should lead to increase in debtor..
Is my explaination right??
when we Sale on credit our debtor increases,which leads To block of cash Hence negative cash balance...
In above question negative cash balance should lead to increase in debtor..
Is my explaination right??
Parminder Singh
(744 Points)
Replied 08 April 2018
if debtors are shown negative in WC changes in cashcflow statements it means debtors have increased. if it shows negative in WC change only in question and not in cash flow statements it means debtors have decreased. please specify in your question
Tech2abhi
(174 Points)
Replied 09 April 2018
negative debtors are in Change in working capital..
As per your explaination it should be increasing
but a question in practice manual shows that they are decreasing
As per your explaination it should be increasing
but a question in practice manual shows that they are decreasing
akhil yadav
(student)
(28 Points)
Replied 09 April 2018
working capital is current assets - current liabilities.. if assets decreases then working capital also decreases to that extent.. our assets value must always b greater than our liabilities indicating positive working capital.
Parminder Singh
(744 Points)
Replied 09 April 2018
@ Tech to abhi, please tell me question number and edition of pm
satish
(teaching)
(2046 Points)
Replied 09 April 2018
in simple words.
amount receivable from one of the debtor is Rs.100. (opening)
during the period amount received from debtor is Rs. 60.
so closing balance is Rs. 40.
___________________________________________________
here we should understand:
treatment in difference amount of opening and closing (100-40)
i.e. decrease in debtors = nothing but cash inflow
so we should take positive number in changes in working capital (cash inflow)
we should identify the cash inflow or out flow based on chages in working capital items
based on above explanation:
decrease in current asset : cash inflow
increase in current asset : cash outflow
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