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Sir for calculating payable days
Which of the below should be given the priority
Cost of sales
Or
Purchases?
Similarly for calculating inventory days
Which of the below needs to be given the first priorityCost of sales
Or
Purchases?
For payables days we should use credit purchases (if we are given it).
For inventory days we should use cost of sales (because inventory is valued at the cost of production).
The cost of production is the cost of what is produced.
The cost of sales is the cost of what is sold.
A company does not always sell everything they produce – the difference is left in inventory.
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