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In this question in computation of debtors why they have considered cost of sales instead of sales?. I think it is total approach....it could have been taken cost of sales...of it would have been cash cost approach.
Answers (4)
Investment in debtors is generally calculated using cost of sales instead of sales since sales includes profit element. If it is specifically asked in the question to calculate on cash cost basis then we will ignore depreciation in calculation of cost of goods sold.
Thread Starter
Star CaBut should we have to eleminate profit element even in total approach
Ideally should be eliminated.
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