Question

If total assets are Rs 400000 and net worth is Rs 120000, profit Rs 25000, compute the creditors

Answer 1

Given
Total assets = Rs 400000

Net worth = Rs 120000

Profit = Rs 25000

We know that

Networth = Total assets - Total liabilities

120000 = 400000 - Total Liabilities

Total liabilities= 400000 - 120000

Total liabilities= 280000

Total liabilities= 280000( is inclusive of 25000 as the profit is part of Shareholder's Equity/Fund)

Assuming that there are no other liabilities except creditors and Shareholders Equity/Fund..

Then Creditors will be Total Liabilities - Shareholders Equity/Fund

Creditors= 280000 - 25000 = 255000..is the answer..