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( cr) Sales – 21000
Gross profit margin -25%
Inc in stock -2000
Paybles balance is increased by 3000 to ease cash flow
Calculate budget payment to supplier?My –
21000*.75- 15750
Add- 2000 ( since cr purchase)
Add- 3000 ( no intention to pay)Book-
Add 2000
Less 3000
But why?
Thanks sirIf payables increase then it means you are paying less to the supplier.
Suppose at the start of the year you owed 1,000, and you buy goods for 5,000. That means you now owe 6,000. Suppose you don’t pay it all and end up owing 4,000 at the end of the year. That means that you must have only actually paid 2,000.
The 2,000 is the purchases of 5,000 less the increase in the payables of 3,000.
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