I think this Question from candidate resource is wrong. B is the answer given there, they deducted the positive change in the inventory which should be added to the COGS. increase in inventory is a use of cash means its an outflow.
ya fir another logic, humne saman kharida lekin usme se sirf 12831 ka sell kiya or 792 ka saman ending balance m include hua to total purchases 12831+792. and payables increase hua 295 means 295 pay nhi kiye to less ho jyega 12831+792-295=13328.
correct me if I’m wrong !!!
Yes there’s a problem in the question, in the solution the have deducted 792 to come at 11744. in the question 792 should be written in brackets. Yes if we solve taking it as +ve only. 12831-295+792=13328 will be the answer. The solution given for answer B say (Plus: Increase in inventory but has deducted it (792)) .Since there’s no option, I think it’s some typo only. You may check below discussion part, there also many have written and raised the same question regarding it.
yes you are right, just checked the answer below, they have written there plus but while making the adjustments they might have put the brackets mistakenly.
By the way when is your exam due?
November 2024
Me too, to kya contact share krega tb ek sath padh skte hai, means koi problem doubt aye to direct contact kr skte h ek dusre ko, agr krega to bolna mera 1 mail Id hai utna use nhi krte de dnge usme apna whatsapp number mail kr dena.
warna to jo jaisa chal rha h chalte rhega!!!
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Arre question is not wrong, Hum jab direct method se CFO nikalte hai tab sources of cash ko add karte and uses of cash ko subtract karte hai. Ye question ko thikse dekhne par ye samajhta hai ke inventory is a Source of fund because change in inventory is added to get CFO. Just because 792 is not given in bracket we can’t implicitly assume that inventory has risen. Remember that the change in inventory is positive 792 in the CFS. Thus as change in inventory is source of cash i.e. inflow it means inventory kam hua hai. And accordingly now cash to supplier will be calculated.
Answer read karna iss Question ka usme v inventory ko plus kiya hai lekin calculate krne time galti se bracket de diya and deduct kr diya h. warna isme assume karne ka kuch nhi hai, accounts me agar positive change ata hai to without bracket rehta hai and negative change ane se bracket dete hai like isme dekho change in AR bracket me diya hai. means AR reduce hua or hume cash mila lekin inventory ko bracket nhi diya means usme positive change hua hai means purchased hai.12381 +792=13173 ka total purchase kiye lekin usme se kuch dena baki hai jisse ki AP increase hua iss liye 295 total me se deduct hoga. 13173-295=12878.
and tumne jo source of cash bola wo inventory reduce hone se hoga. inventory rise hone se use of cash. simply samjho ki inventory aya to cash deke aya hence use of cash and innventory reduce hota means maal bik gya to cash aya means source of cash.
I don’t agree, I don’t get it at all. It’s is given in question change in inventory without brackets i.e. it is positive. It means it is an increase in inventory and it is Use of Cash. So we add it in the cash paid to suppliers. In the answer it is subtracted but along with it, there’s written PLUS : Increase in Inventory. How would you justify that it’s not a mistake. I did multiple questions and everywhere an inc in inventory is added in the cash paid to suppliers ( Direct Method)…. You just clear my doubt and tell me how would you justify that PLUS error, otherwise my whole concept in mind is at stake. Check out the discussion below the question in candidate resources. Everyone has a doubt in this one. I’m sharing the screenshot of the answer below.
your whole concept is right. before noticed the mistake in the answer I also feel that where I am doing wrong but after that now I am OK, there is no fault in my understanding.
Yes Yes …I was referring to Anushka, we both are on the same page actually.
The answer says, PLUS : Increase in Inventory (792) what does it mean ? It means agar inventory badhega i.e. increase hoga then hum purchases nikalte samay usko add karenge. But idhar increase in inventory is negative ,as 792 is in bracket, what does it mean? ki inventory decrease hue hai. upar question me diya hai ki -“change in inventory is positive 792.”
ek baat batao, CFO nikalte samay inventory ko add kiya iska ky matlab hai? yehi na ki inventory se cash inflow hua hoga i.e. source of cash toh phir kyu usse outflow maan rahe ho?
And I don’t think your concept is at stake.
you are not ready to understand what we are saying.
so detail me pura explain krte hai.
direct method me cash received from customer and cash paid to supplier k alawa kuch nhi hai man lo. to ab hum question construct krne ka try krte hai.
sales 200000 cogs 120000 inventory at the begining 50000 and at year end 60000. AR at begining of the year 25000 and at year end 30000 AP at begining 30000 and at year end 35000. depreciation and other operating man lo 0 hai.
to isse direct method se answer nikalte hai.
cash received from customers= sales- delta AR= 200000-5000=195000
cash paid to suppliers= cogs(-+)delta inventory and (+-)delta AP
isme tumko jo krna hai wo hai purchases nikalna hai and kitna pay kiye usme se wo dekhna hai.
closing inventory= begining inventory+ purchases-cogs
60000=50000+purchases-120000
so purchases = 120000+60000-50000=130000
130000 supplier se mal kharide and usko payment kiye lekin apne AP ka balance increase hua and ye tab increase hota hai jb pay krna baki hota hai. to payment kitna kiye 130000 buy and payable increased by 5000 means 5000 nhi diye 130000 me se. to supplier ko pay kiye 125000.
ab CFO = 195000-125000=70000
ab isko he indirect se nikalo.
as there are no depreciation and other expenses and taxex NI is the difference between sales and cogs
NI=200000-120000=80000
ab isme adjustment karo. increase in operating assests are use of cash hence increase in inventory will deducted from 80000, and AR also rise by 5000 so it will also get deducted. then increase in operating liabilities means source of cash so 5000 will get added to it.
so the CFO from indrect method comes to
80000-10000-5000+5000= 70000.
abhi v tumko kuch kehna hai ki question sahi hai ki galat? means question me positive inventory change diya hai to usko implicitly assume na kre ki wo additional purchases hai!
we are saying ki answer wrong diya hai. answer me v plus kiya inventory 792 ko COGS me. lekin galti se bracket de diya calculate krne time. this is an ERROR.
or kuch bolna ho related to this??
I think you have problem recognizing which is a source of cash and which is an use of cash.
And Question m positive diya hai to uska means additional inventoy added means we purchased additional inventory during the year, and we purchased means use of cash.
CFO nikalte samay COGS me add kiye iska matlab inflow hoga ye galat hai, iskta matlab hume utna or pay krna padega supplier ko wo additional purchases hai.
then ultimately wo deduct hoga cash received from customers se tb ayega net CFO
I see it differently than you do.
you are not ready to understand what we are saying.
so detail me pura explain krte hai.
direct method me cash received from customer and cash paid to supplier k alawa kuch nhi hai man lo. to ab hum question construct krne ka try krte hai.
sales 200000 cogs 120000 inventory at the begining 50000 and at year end 60000. AR at begining of the year 25000 and at year end 30000 AP at begining 30000 and at year end 35000. depreciation and other operating man lo 0 hai.
to isse direct method se answer nikalte hai.
cash received from customers= sales- delta AR= 200000-5000=195000
cash paid to suppliers= cogs(-+)delta inventory and (+-)delta AP
isme tumko jo krna hai wo hai purchases nikalna hai and kitna pay kiye usme se wo dekhna hai.
closing inventory= begining inventory+ purchases-cogs
60000=50000+purchases-120000
so purchases = 120000+60000-50000=130000
130000 supplier se mal kharide and usko payment kiye lekin apne AP ka balance increase hua and ye tab increase hota hai jb pay krna baki hota hai. to payment kitna kiye 130000 buy and payable increased by 5000 means 5000 nhi diye 130000 me se. to supplier ko pay kiye 125000.
ab CFO = 195000-125000=70000
ab isko he indirect se nikalo.
as there are no depreciation and other expenses and taxex NI is the difference between sales and cogs
NI=200000-120000=80000
ab isme adjustment karo. increase in operating assests are use of cash hence increase in inventory will deducted from 80000, and AR also rise by 5000 so it will also get deducted. then increase in operating liabilities means source of cash so 5000 will get added to it.
so the CFO from indrect method comes to
80000-10000-5000+5000= 70000.
abhi v tumko kuch kehna hai ki question sahi hai ki galat? means question me positive inventory change diya hai to usko implicitly assume na kre ki wo additional purchases hai!
we are saying ki answer wrong diya hai. answer me v plus kiya inventory 792 ko COGS me. lekin galti se bracket de diya calculate krne time. this is an ERROR.
or kuch bolna ho related to this??
Yes.. it’s no one’s fault. It’s great to have different opinions for a single concept. We can lean more.
Yes.. it’s no one’s fault. It’s great to have different opinions for a single concept. We can lean more.
Here is the answer…Check kro aur btao.
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