The following was extracted from the books of MEGA COMPANY NIG. LTD₦Trade debtors350,000Fixtures and fittings600,000Cash at bank25,000Cash in…

JAMB Accounting 2023 53 views

The following was extracted from the books of MEGA COMPANY NIG. LTD

₦
Trade debtors 350,000
Fixtures and fittings 600,000
Cash at bank 25,000
Cash in hand 5,500
Trade creditors 116,500
Bank overdraft 7,500
Building 950,000
Motor van 35,000

The working capital of the company is

The following was extracted from the books of MEGA COMPANY NIG. LTD

₦
Trade debtors 350,000
Fixtures and fittings 600,000
Cash at bank 25,000
Cash in hand 5,500
Trade creditors 116,500
Bank overdraft 7,500
Building 950,000
Motor van 35,000

The working capital of the company is

  1. ₦565,000
  2. ₦280,000
  3. ₦256,500 ✓
  4. ₦156,000

Explanation

Working capital = Current assets – Current liabilities. Current assets: Debtors ₦350,000 + Bank ₦25,000 + Cash ₦5,500 = ₦380,500. Current liabilities: Creditors ₦116,500 + Overdraft ₦7,500 = ₦124,000.

Calculate: ₦380,500 – ₦124,000 = ₦256,500. Fixed assets like buildings, fixtures, and vehicles don’t count as current assets for working capital calculation.

Remember: Working capital shows day-to-day financial health. It’s short-term assets minus short-term debts.

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