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Working capital. In cash budget Maya Ltd sum

While preparing profarma balance sheet while calculating cl stock of inventory we use cost of sales formula in order to get cl stock. But how can cost of sales be payment made to creditors 360 + 600 + 390 ie 1350 I did not understand how sir taken 1350 as cost of sales what is logic behind taking cost of sales as payment made to creditors


Sai E

Sai E

CA Foundation

36K+

24-Sep-20 14:13

11

Answers (4)

We buy RM from creditors. Other Overheads like rent / electricity are also paid to creditors . So total Cost of sales can be takes as payment to creditors in most cases .


Sriram Somayajula

Sriram Somayajula

Admin

24-Sep-20 14:17

We buy RM from creditors. Other Overheads like rent / electricity are also paid to creditors . So total Cost of sales can be takes as payment to creditors in most cases .

Sir why do we pay rent and electricity to creditors we pay them only for raw material know


Sai E

Sai E

CA Foundation

36K+

24-Sep-20 15:09

Sir why do we pay rent and electricity to creditors we pay them only for raw material know

Creditor refers to any one to whom you are due money. trade creditors are for RM and production related items - Non trade creditors / non trade vendors are people like rent / electricity etc


Sriram Somayajula

Sriram Somayajula

Admin

24-Sep-20 16:28

Thank you sir for detailed explanation


Sai E

Sai E

CA Foundation

36K+

24-Sep-20 16:30