Working Capital

[Hanuman]

Performed services on credit $150,000 Purchased office equipment for cash 10,000 Recognized salaries expense 54,000 Purchased paint supplies on on credit 25,000 Consumed paint supplies 20,000

from Kaplan

for calculating working capital :

$150K - $54K-$25K … but the answer is $150K - $54K-$20K.

Question - > If we purchase on credit then wouldn’t we recognize accounts payable for paint?

[breadmaker]

Debit supplies 25,000, credit A/P @ 25,000. No effect on working capital.

[Hanuman]

@breadmaker

Debit supplies 25,000, credit A/P @ 25,000. No effect on working capital.

Okay so net effect cancels out. Asset and Liability have increased by the same amount