CA Govind is conducting stock audit of a borrower availing cash credit facility of 120lacs from branch of a bank. The cash credit facility is…
CA Intermediate · Auditing and Ethics · MTP · September 2025
CA Govind is conducting stock audit of a borrower availing cash credit facility of 120lacs from branch of a bank. The cash credit facility is against security of paid stocks and debtors up to 90 days. Margin stipulated is 30% for stocks and 40% for debtors. Following further information is available as on 31.12.24: - Particulars Amount (₹) Value of stocks 150 lacs Value of stocks (fully damaged) included in above 30 lacs Value of debtors 55 lacs Value of debtors exceeding 90 days included in above 15 lacs Value of creditors for goods 60 lacs Compute the amount of drawing power.
Suggested Answer and Working Notes:
The computation of Drawing power is as under: Particulars Amount (₹) Value of stocks as on 31.12.24 150 lacs Less: value of damaged stocks 30 lacs 120 lacs Less: creditors for goods as on 31.12.24 60 lacs Value of Paid stocks 60 lacs Less: Margin @ 30% 18 lacs Drawing power (A) 42 lacs Value of debtors as on 31.12.24 55 lacs Less: debtors exceeding 90 days 15 lacs 40 lacs Less: Margin @ 40% 16 lacs Drawing Power (B) 24 lacs Drawing Power (A+B) 66 lacs Conclusion: Drawing Power should be 66lacs.
Topics: Audit of Banks
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