What are inventories? How is shareholders equity calculated? How are taxes different?



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Hi sir,
This question is from the lecture on balance sheet basics.

1)You mentioned that inventories include olive oil,cheese etc..(in case of dominos). But these are included in cogs (INCOME STATEMENT). Actually they have to buy them. But added it in assets. why?

2)In this lecture you mentioned loan (1,00,000)as current liabilities and total loan taken(25,00,000)as non- current liabilities.And these two included in the shareholder's equity. But this 1,00,000 is already included in 25,00,000. Then why you added both to the net worth(shareholder's equity)?
3)Is there any difference between the taxes in balance sheet and income statement? Are they same?

Thank you!

1 Answer(s)


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Hi Ramu,

Good questions. Please find answers below -

#1. You are right - cheese, olive oil etc are COGS, but where do the COGS come from ? They are stored as inventory (balance sheet) in store houses before they are used as COGS (Income Statement). Once you buy something, it is stored as an asset until the day you use it.

#2. Excellent observation - I should have clarified this in the video. When current loan is Rs.1 Lakh and non-current loan is Rs.25 lacs, then total loan is Rs.26 lacs. Everytime a portion of the non-current loan becomes current, that portion is subtracted from the non-current line item.

#3. Yes, they are different. Its best to watch the module on "Advanced Balance Sheet" to understand this better.

Hope this was helpful.