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
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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 }
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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)]
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Which one is correct ?? Please help