Question

The following information is obtained from the books of Devdutt Ltd. : Working capital - ₹ 4,00,000
Trade Payables - ₹ 50,000
Other Current liabilities - ₹ 1,00,000
Current assets of Devdutt Ltd. are :

• A. ₹ 2,50,000
• B. ₹ 4,50,000
• C. ₹ 5,00,000
• D. ₹ 5,50,000

Hint:

Working Capital = Current Assets - Current Liabilities
Therefore, Current Assets = Working Capital + Current Liabilities
Always include all current liabilities (Trade Payables, Outstanding Expenses, Bank Overdraft, etc.) when calculating total current liabilities.

Answer 1

The Correct Option is D

We need to find the Current Assets of Devdutt Ltd. given Working Capital, Trade Payables, and Other Current Liabilities.
Step 1: Recall the formula for Working Capital.
\[ \text{Working Capital} = \text{Current Assets} - \text{Current Liabilities} \] Step 2: Calculate Total Current Liabilities.
Current Liabilities include Trade Payables and Other Current Liabilities. \[ \text{Current Liabilities} = \text{Trade Payables} + \text{Other Current Liabilities} \] \[ \text{Current Liabilities} = ₹ 50,000 + ₹ 1,00,000 = ₹ 1,50,000 \] Step 3: Use the Working Capital formula to find Current Assets.
\[ \text{Working Capital} = \text{Current Assets} - \text{Current Liabilities} \] \[ ₹ 4,00,000 = \text{Current Assets} - ₹ 1,50,000 \] \[ \text{Current Assets} = ₹ 4,00,000 + ₹ 1,50,000 = ₹ 5,50,000 \] Step 4: Verify.
Current Assets = ₹ 5,50,000
Current Liabilities = ₹ 1,50,000
Working Capital = ₹ 5,50,000 - ₹ 1,50,000 = ₹ 4,00,000 ✓ Final Answer: (D) ₹ 5,50,000