abhishreshthaa
Abhijeet S
WORKING CAPITAL:
Meaning and definition of working capital
In simple terms, working capital is the amount of funds which a small scale enterprise must have to finance its day-to-day operations. It is short term finance. An effective utilization of working capital results in the maximization of productivity and profits.
The accounting principles board of the American Institute of certified Public Accountants, U.S.A has defined working capital as follows: “working capital, sometimes called net working capital, is represented by the excess of current assets over current liabilities and identifies the relatively liquid portion of the total enterprise capital which constitutes a margin of buffer for maturing obligations within the ordinary operating cycles of the business.”
Rules to be followed while calculating the schedule of changes in working capital:-
1. An increase in the current assets decrease in the working capital
2. An decrease in the current assets increase in the working capital
3. An increase in the current liabilities decrease in the working capital
4. A decrease in the current liabilities increase in the working capital
Meaning and definition of working capital
In simple terms, working capital is the amount of funds which a small scale enterprise must have to finance its day-to-day operations. It is short term finance. An effective utilization of working capital results in the maximization of productivity and profits.
The accounting principles board of the American Institute of certified Public Accountants, U.S.A has defined working capital as follows: “working capital, sometimes called net working capital, is represented by the excess of current assets over current liabilities and identifies the relatively liquid portion of the total enterprise capital which constitutes a margin of buffer for maturing obligations within the ordinary operating cycles of the business.”
Rules to be followed while calculating the schedule of changes in working capital:-
1. An increase in the current assets decrease in the working capital
2. An decrease in the current assets increase in the working capital
3. An increase in the current liabilities decrease in the working capital
4. A decrease in the current liabilities increase in the working capital