How is net income calculated here??



1
Tata Motors paid Rs.5 Crores to an external IT consultant for a software project that took 6 months to complete. In July how much would Tata Motors' cash and net income decrease by due to this transaction?

1 Answer(s)


0

Since 5 crores has been paid, cash on the balance sheet will decrease by 5 crores.

since the project takes 6 months to complete, according to expense recognition this 5 crores has to be split equally into 6 months. so monthly expenditure is only Rs. 83.33 lakhs. Hence net income will decrease by that amount.