Compute the Drawing power for Cash Credit limit granted to S Ltd. by Trust Bank for the month of March 2025 from the following information:…
CA Intermediate · Auditing and Ethics · PYQS · May 2025
Compute the Drawing power for Cash Credit limit granted to S Ltd. by Trust Bank for the month of March 2025 from the following information: Particulars Amount in (₹) Value of stocks 50,000 Value of debtors (including debtors of 5,000 for an invoice dated 17.11.2024) 45,000 Value of creditors for goods 15,000 Sanctioned limit 45,000 Margin on stock is 20% and on debtors is 50%. Note: Debtors older than 3 months are ineligible for calculation of D.P. (4 Marks)
Suggested Answer and Working Notes:
(a) (b) Computation of Drawing power of S Ltd. for the month of March 2025: Value of stocks 50,000 Less: creditors for goods 15,000 Value of Paid stocks 35,000 Less: Margin @ 20% 7,000 Drawing power (A) 28,000 Value of debtors 45,000 Less: debtors exceeding 90 days 5,000 40,000 Less: Margin @ 50% 20,000 Drawing Power (B) 20,000 Drawing Power (A+B) 48,000 The sanctioned limit given in the question is 45000whereas drawing power as per the above working is 48000. Accordingly, drawing power for Cash Credit Limit granted to S Ltd. by Trust Bank for the month of March 2025 would be restricted to sanctioned limit i.e.,45000.
Topics: Audit of Banks
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