Net increase in working captial is Rs. 5,000
Net decrease in working captial is Rs. 5,000
Net increase in working captial is Rs. 19,000
Net decrease in working captial is Rs. 7,000
Answer is Right!
Answer is Wrong!
The correct answer is: B. Net decrease in working capital is Rs. 5,000
Working capital is the difference between current assets and current liabilities. Current assets are assets that are expected to be converted into cash within one year, such as cash, accounts receivable, and inventory. Current liabilities are liabilities that are due within one year, such as accounts payable and short-term debt.
In this case, cash received from debtors is a current asset, and furniture purchased is a current liability. Therefore, the net effect on working capital is a decrease of Rs. 5,000.
Here is a brief explanation of each option:
- Option A: Net increase in working capital is Rs. 5,000. This is incorrect because the net effect on working capital is a decrease of Rs. 5,000.
- Option B: Net decrease in working capital is Rs. 5,000. This is the correct answer.
- Option C: Net increase in working capital is Rs. 19,000. This is incorrect because the net effect on working capital is a decrease of Rs. 5,000.
- Option D: Net decrease in working capital is Rs. 7,000. This is incorrect because the net effect on working capital is a decrease of Rs. 5,000.