How is net income calculated here??

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)


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.

Your Answer

Click on this code-snippet-icon icon to add code snippet.

Upload Files (Maximum image file size - 1.5 MB, other file size - 10 MB, total size - not more than 50 MB)