- This topic has 4 replies, 2 voices, and was last updated 1 year ago by
.
- Posts
Sir i just wanted to confirm two things
1) when we are given with the order quantity and we are to change order quantity ….the decrease in overdraft is calculated using average inventory?(reference question dusty co sept 2019)
2) when we are given with inventory in sofp or inventory holding period and cost of sales…and there is a change in inventory holding period …the increase/decrease in overdraft is calculated using the formula
Inventory decrease/increase* overdraft interest
Where inventory inc/dec will be
Revised inventory balance – old balance
And no average will be done right??Sir i just wanted to confirm two things
1) when we are given with the order quantity and we are to change order quantity ….the decrease in overdraft is calculated using average inventory?(reference question dusty co sept 2019)
2) when we are given with inventory in sofp or inventory holding period and cost of sales…and there is a change in inventory holding period …the increase/decrease in overdraft is calculated using the formula
Inventory decrease/increase* overdraft interest
Where inventory inc/dec will be
Revised inventory balance – old balance
And no average will be done right??When we are given the order quantity and we need to change the order quantity, the decrease in overdraft can be calculated using the average inventory. This is based on the principle that as the average inventory decreases, there will be a saving of interest on the overdraft.
When we are given the inventory in the statement of financial position (SOFP) or the inventory holding period and cost of sales, and there is a change in the inventory holding period, the increase or decrease in overdraft can be calculated using the formula: Inventory decrease/increase * overdraft interest. This formula allows us to determine the impact of changes in inventory on the overdraft and the corresponding interest payable.
So sir we can say that the inc/dec in inventory=inc/dec in overdraft
And same goes for receivables
Right?
- You must be logged in to reply to this topic.