February, 2024 | CA B K Goyal & Co LLP

Section 11 – THE INDIAN CONTRACT ACT, 1872

THE INDIAN CONTRACT ACT, 1872 / CA Bhuvnesh Goyal / February 29, 2024

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Himachal Pradesh e-District Portal

Government Schemes / CA Bhuvnesh Goyal / February 29, 2024

Himachal E-district revolutionises citizen-centric services by offering a seamless online platform. It simplifies access to government services, empowering residents with efficient digital solutions. This initiative enhances transparency, accessibility, and convenience, reducing bureaucratic hurdles. E district HP facilitates various services, including certificates, applications, and verifications, minimising physical visits to government offices. Citizens can avail themselves of services like birth certificates, income certificates, and more through an easily navigable online interface. This transformative platform streamlines administrative processes, fostering a more accessible and responsive governance framework for the people of Himachal Pradesh. The Himachal Pradesh e-District Portal was created to enhance the efficiencies of the various Departments at the district level to enable seamless service delivery to the citizen. Under the scheme, citizen facilitation centres, are envisioned to be built at District, Tehsil, Sub-division and Block levels. Also, Village level front-ends would be established through Common Services Centres (VLEs) for delivery of services. Services Provided under the Portal Revenue Department Revenue Court Rural Development Department/Urban Development Department Panchayati Raj Department/Urban Development Department Women and Child Welfare Department Department of Labour and Employment Department of District Administration Department of Redressal and Public Grievances Department of Agriculture Department of Transport SC, OBC and Minority Affairs Department Revenue Department-Revenue Department allows the applicant to apply for the issuance of Rural Area Certificate, legal heirs certificate, Backward Area Certificate, Caste (SC/ST) Certificate, Minority Community Certificate, Agriculturist Certificate, Dogra Class Certificate, Character Certificate, Bonafide Himachali Certificate, Income Certificate,Other Backward Class Certificate, Freedom Fighter Certificate, Domicile Certificate, Indigent (Needy Person) Certificate, Copy of Nakal, Copy of Record of Rights. Revenue Court- The application for registering Revenue Court Cases, Status Monitoring, Recording Case History, Uploading Cause List, Uploading /Downloading Judgement etc. under the services revenue court. Rural Development Department/Urban Development Department-The application for Issuance of BPL Card to BPL Family, Registration under MGNREGA for Rural Worker Seeking Work, Demanding Work under MGNREGA are applicable under this department. Panchayati Raj Department/Urban Development Department-The application for Registration of Birth and Issuance of Birth Certificate, Registration of Death and Issuance of Death Certificate, Registration of Marriage and Issuance of Marriage Certificate, Issuance of Copy of Pariwar Register are accessible under this department. Women and Child Welfare Department- The application to Apply for Availing Benefits under Mother Teresa Matri Sambhal Yojna, Widow Re-Marriage Scheme, CM Bestowing Plan, Beti Hai Anmol Yojna are maintained under this department. Department of Labour and Employment- This department benefits the user with the list of services mentioned below. Registration of Shops and Commercial Establishment Renewal of Shops and Commercial Establishment Registration Registration of Establishment Employing Contract Labour Issuance of Licence for Contract Labour Renewal of Licence for Contract Labour Registration of Employing Migrant Workmen Motor Transport Worker Registration Renewal of Motor Transport Worker Registration Migrant Workmen Contractor Licence Registration Migrant Workmen Contractor Licence Renewal Department of District Administration- The application for Issuance of Arms License can be obtained under this department. Department of Redressal and Public Grievances-The application for Grievance Redressal can be requested under the Department of Redressal and Public Grievances. Department of Agriculture-The application for Issuance of Soil Testing Card is issued under the department of agriculture. Department of Transport- An Application for Issuance of Driving License is granted under the department of transport. SC, OBC and Minority Affairs Department- The application for Disability ID Card, Senior Citizen ID Card can be obtained under this department. Pay Water Bill This portal also facilities the citizens with the service for making their water bill payments online without any difficulties. Water bill can be paid by clicking “Pay Water Bill” tab on the portal home screen. Enter your respective bill number and then click on the “Search” button to make payment. MC Shimla Service Under this service, the applicant can apply for the list of online services mentioned below. Application for NOC of electricity Application for the dumping of Malva Application for permission of canopy Application for water connection Application for sewerage connection Property tax payment Himachal Pradesh e-District Portal Provide Login Details Step 1: You need to provide login details for applying through any of the services. New User Registration Step 2: Click on “New Registration” which is displayed on the home page. Provide Applicant Details Step 3: Now enter the required details of the applicant. Step 4: Then click on the “Register” button. Complete the Registration Step 5: After registering the user needs to revisit the home page to login. Select the Service Step 6: Now select the appropriate service registration and certificate from the ” list of services” option. Apply online Step 7: Click on “Apply Online” and then the application form will open on the next page. Fill the Form Step 8: Fill the form with the details and upload the scanned documents. Registration Successful Step 9: Finally click on the “Submit” button for successful registration. Track Application status Step 1: Click on the “Track Application Online” option. Step 2: Enter the Application number and select the “Search” button to view the status of your application. FAQs What is the Himachal Pradesh e-District Portal? The Himachal Pradesh e-District Portal is an online platform designed to provide various government services to the residents of the state. Can I track the status of my application on the e-District Portal? Yes, many e-District Portals provide a tracking mechanism where applicants can check the status of their applications online. Users may need to input their application reference number or other details to track their application. What documents are required to apply for various certificates on the e-District Portal? The required documents can vary depending on the type of service. Generally, applicants need to upload supporting documents such as proof of identity, address, and any specific documents related to the service they are applying for. Practice area’s of B K Goyal & Co LLP Income Tax Return Filing | Income Tax Appeal | Income Tax Notice | GST Registration | GST Return Filing | FSSAI Registration | Company Registration | Company Audit | Company Annual Compliance | Income Tax Audit | Nidhi Company Registration| LLP Registration | Accounting in India | NGO Registration | NGO Audit |

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Take rate

Business / CA Bhuvnesh Goyal / February 29, 2024

A take rate is how much money a business makes from a transaction. Take rates help companies understand how well the business is doing. Typically, higher take rates indicate that a company is successful because it can generate more revenue. By keeping a close watch on their take rates, companies can make better business decisions — for example, knowing when to allocate resources to maximize sales or increase their marketing efforts. Although take rates are not new, the term has become more popular with the increase of companies like Airbnb, Shopify, Etsy, and PayPal. However, the card networks like American Express, Mastercard, and Visa have used take rates to define their revenues for many years. What Is Take Rate? Take rate is a formal term for ‘take a cut.’ Before explaining the concept, let us understand the background. Businesses follow many options to sell their products. New companies with less investment sell on third-party websites like Amazon, eBay, etc. When these platforms help generate sales, they expect a portion of the revenue to facilitate the transaction. Apart from serving as a platform linking the buyer and the seller, the websites provide payment services, advertise for the client, and offer reverse logistic services. Three different platforms charge these fees: eCommerce: These marketplaces facilitate transactions, thus reducing businesses’ need to maintain a separate website or app. Examples include Amazon, eBay, etc. Payment providers: Online shopping has been expedited to a great extent through online payment services. Payment gateways, e-wallets, etc., charge a fee for this. Examples include PayPal, Visa, etc. Service platforms: These marketplaces bring together customers and service providers. They collect a commission for acting as a link. Examples include Uber, Airbnb, etc. The amount that a platform collects as commission depends entirely on its business and revenue model. It varies from website to website and relies on the nature of the service offered. Some marketplaces collect a fixed rate, whereas others collect fixed and variable components. For example, the Airbnb take rate is 3% of the revenue from hosts. They also collect a 14% fee from guests, which is not usually considered the take rate (since the metric only applies to sellers). Another example is that of Amazon. According to the eCommerce Marketplace, the seller has to pay two components – first, $0.99 per unit sold—and secondly, an 8-15% referral fee on the gross merchandise value. How to Calculate Take Rate Take rate calculation involves the following formula given below: The gross merchandise value or GMV is the business’ total sales facilitated through that particular platform or service provider. Calculation Example Airbnb charges a service fee of 3% to hosts. Suppose Ryan is a host who charges Paul $500 for a day’s stay at his house. Here, the GMV from this particular transaction is $500. Ryan would have to pay a fee of $15 (3%) from the amount Paul pays him. Take another example of Amazon. Leonard sells 30 pairs of shoes at $200 each. His revenue is $6000. He is charged a referral fee of 10%. Commission charged by Amazon: ($0.99 x 30) + ($6000 x 10%) = $629.7 Factors That Affect a Take Rate When it comes to product marketplaces that enable transactions on behalf of third-party sellers, the take rate can differ based on the goods that are offered. As an example, the take rates Amazon charges vary based on the type of product it is selling. That means that the take rate for electronic items is not the same as the take rate for household products. Chargebacks can also reduce a merchant’s take rate as a result of the penalties and fees that the merchant needs to pay back to its customers. Additionally, the more transactions merchants process, the higher their take rates (and vice versa). That’s because many payment processors will offer discounts to companies with high-volume sales. Importance Marketplace take rates are an essential source of revenue for most companies. Lt us consider Amazon. It brings together buyers and sellers. It employs almost a million and a half people around the globe. The income from referral and affiliate marketing enables platforms like Amazon to charge a fee for their services and their role in commerce. Now, there is a general conception that higher take rates are reasonable. A higher commission indicates that the platform can generate higher sales for the seller. But before a seller is ready to pay a higher commission, they should verify if the platform is worth it. Otherwise, giving up a portion of profits for less-than-expected sales will be a loss for the seller. Due to these platforms and payment providers’ competition, they are forced to charge lower rates. A typical example in this regard is eBay. The company charged higher commissions, due to which sellers started opting for newer marketplaces with lower fees, like Etsy. Also, when a payment provider takes a cut, they receive a partial commission. For example, if a seller gets payments through PayPal, but the buyer uses a credit or debit card, a portion of the commission amount collected would be paid to payment networks like Visa, Mastercard, etc. FAQs What is the difference between the take rate and conversion rate? The conversion rate is another significant eCommerce metric that indicates the percentage of people who visit a website converted from visitors to customers. It is calculated as the ratio of total converts to total visitors. The take rate is entirely different as it determines the amount of commission to a third party. Are take rates fixed or variable? Take rates can be fixed or variable, depending on the platform or service provider. Some platforms charge a fixed commission rate for their services, while others employ a variable approach, incorporating factors like transaction value or volume to determine the fee. Do payment providers also have take rates? Yes, payment providers often have take rates in the form of transaction fees. They charge a percentage of the transaction amount for processing payments, making take rates standard in the payment processing industry. It helps them generate revenue for

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Licence for Gamma Irradiation Chamber Facility

Government Schemes / CA Bhuvnesh Goyal / February 29, 2024

This license is required by any person or entity desiring to operate a gamma irradiation chamber facility specified under the Atomic Energy (Radiation Protection) Rules, 2004, issued by AERB. Atomic Energy Regulatory Board (AERB) is a national authority designated by the Government of India having the legal authority for issuing regulatory consent for various activities related to nuclear and radiation facilties and to perform safety and regulatory functions, including their enforcement for the protection of site personnel, the public and the environment against undue radiation hazards. Who can apply Any person or entity desiring to operate a gamma irradiation chamber facility specified under the Atomic Energy (Radiation Protection) Rules, 2004. Documents required Photograph of Radiation Professional Proof of Identity and Date of Birth of Radiation Professional Certificates and Marksheet of Radiation Professional Final Safety Analysis Report (FSAR) Quality Assurance Manual (QAM) Radiation Protection Manual (RPM) Approval applicability/trigger Applicable if setting up and operating a gamma irradiation chamber facility. Atomic Energy Act, 1962 THE ATOMIC ENERGY ACT, 1962ACT 33 OF 1962[15th September, 1962.] An Act to provide for the development, control and use of atomic energy for the welfare of thepeople of India and for other peaceful purposes and for matters connected therewith.BE it enacted by Parliament in the Thirteenth Year of the Republic of India as follows:—1. Short title, extent and commencement.—(1) This Act may be called the Atomic EnergyAct, 1962.(2) It extends to the whole of India.(3) It shall come into force on such date1as the Central Government may, by notification in theOfficial Gazette, appoint.2. Definitions and interpretation.—(1) In this Act, unless the context otherwise requires,—(a) “atomic energy” means energy released from atomic nuclei as a result of any process,including the fission and fusion processes;(b) “fissile material” means uranium 233, uranium 235, plutonium or any material containingthese substances or any other material that may be declared as such by notification by the CentralGovernment;2[(b) “Government company” means a company in which not less than fifty-one per cent. of thepaid up share capital is held by the Central Government;](c) “minerals” include all substances obtained or obtainable from the soil (including alluvium orrocks) by underground or surface working;(d) “notification” means notification published in the Official Gazette;(e) “Plant” includes machinery, equipment or appliance, whether affixed to land or not;(f) “prescribed equipment” means any property which the Central Government may, bynotification, prescribe, being a property which in its opinion is specially designed or adapted or whichis used or intended to be used for the production or utilisation of any prescribed substance, or for theproduction or utilisation of atomic energy, radioactive substances, or radiation, but does not includemining, milling, laboratory and other equipment not so specially designed or adapted and notincorporated in equipment used or intended to be used for any of the purposes aforesaid;(g) “prescribed substance” means any substance including any mineral which the CentralGovernment may, by notification, prescribe, being a substance which in its opinion is or may be usedfor the production or use of atomic energy or research into matters connected therewith and includesuranium, plutonium, thorium, beryllium, deuterium or any of their respective derivatives orcompounds or any other materials containing any of the aforesaid substances;(h) “radiation” means gamma rays, X-rays, and rays consisting of alpha particles, beta particles,neutrons, protons and other nuclear and sub-atomic particles; but not sound or radio waves, or visible,infrared or ultraviolet light;(i) “radioactive substance” or “radioactive material” means any substance or material whichspontaneously emits radiation in excess of the levels prescribed by notification by the CentralGovernment. 1. 21st September, 1962, vide notification No. G.S.R. 1254(E), dated 18th September, 1962, see Gazette of India,Extraordinary, Part II, sec. 3 (i).2. Clause (bb) shall stand substitute (date to be notified) by Act 5 of 2016, s. 2, to read as under:—(bb) “Government company” means a company in which—(i) not less than fifty-one per cent. of the paid-up share capital is held by the Central Government; or(ii) the whole of the paid-up share capital is held by one or more of the companies specified in sub-clause (i) andwhich, by its articles of association, empowers the Central Government to constitute and reconstitute its Board ofDirectors.3(2) Any reference in this Act to the working of minerals shall be construed as including a reference tothe mining, getting, carrying away, transporting, sorting, extracting or otherwise treating of minerals.(3) Any reference in this Act to the production or use of atomic energy shall be construed as includinga reference to the carrying out of any process, preparatory or ancillary to such production or use.3. General powers of the Central Government.—Subject to the provisions of this Act, the CentralGovernment shall have power—(a) to produce, develop, use and dispose of atomic energy 1[either by itself or through anyauthority or corporation established by it or a Government company] and carry out research into anymatters connected therewith;2[(b) to manufacture or otherwise produce any prescribed or radioactive substance and anyarticles which in its opinion are, or are likely to be, required for or in connection with, the production,development or use of atomic energy or such research as aforesaid and to dispose of such prescribedor radioactive substance or any articles manufactured or otherwise produced;(bb) (i) to buy or otherwise acquire, store and transport any prescribed or radioactivesubstance and any articles which in its opinion are, or are likely to be, required for, or inconnection with, the production, development or use of atomic energy; and(ii) to dispose of such prescribed or radioactive substance or any articles bought or otherwiseacquired by it,either by itself or through any authority or corporation established by it, or a Government company;](c) to declare as “restricted information” any information not so far published or otherwise madepublic relating to—(i) the location, quality and quantity of prescribed substances and transactions for theiracquisition, whether by purchase or otherwise, or disposal, whether by sale or otherwise;(ii) the processing or prescribed substances and the extraction or production of fissilematerials from them;(iii) the theory, design, construction and operation of plants for the treatment and productionof any of the prescribed substances and for the separation or isotopes;(iv) the

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GST on the sale of used Motor Vehicle

Goods & Service Tax / CA Bhuvnesh Goyal / February 29, 2024

The introduction of GST has brought a positive impact on the automobile sector. Previously, traders could not claim credit for excise duty and VAT paid, which would further increase the cost of purchases. However, GST has eliminated the cascading effect of taxes, reducing the price of cars. Effects on the price of a car due to GST Previously, car consumers were charged two main taxes, namely VAT and excise duty. The combined rate would be somewhere between 26.5% and 44%. In comparison, GST rates on cars are much lower ranging from zero to 28%. This reduced the price of automobiles and benefited consumers. Applicability of GST and cess on automobiles GST applies to almost all goods and services. This also includes automobiles, which includes automobiles. The GST rate on cars ranges from zero to 28% depending on the type and use. In addition to GST, new car sales are subject to compensatory cess. Value of supply for calculating GST and taxes on cars Value of supply: Under GST, the value of supply is the money collected by the seller from the buyer in exchange for the sale of goods or services. In the case of related parties, GST is charged on the transaction value. The transaction value is the value at which unrelated parties would trade in the ordinary course of business.Let us calculate and check how the concept works-For example, Mr. A buys a car for Rs 6.5 lakh from the dealer and accessories. Then GST and cess are calculated as follows:Selling Price: Rs 6,50,000 (Delivery Value)GST rate of 18% (falls under the small car category)1% GST rebateTotal Value: Rs 6,50,000 + Rs 1,23,500 = Rs 7,73,500 Discounts in the ordinary trade practice: If the seller provides a deduction from the sales price through discounts before delivery or at the time of delivery and such discount is indicated on the invoice, it is excluded from the value of the delivery. If such discounts are not reflected in the invoice, GST must be paid on the same. Post-delivery discounts: Post-delivery discounts are allowed as a deduction from the rateable value only if the following conditions are met: The discount provided should be a direct consequence of the agreement with the customers. Such an agreement should be concluded either before or at the time of delivery of the goods. ITC should be reversed by the customer. The discount should be tied to the relevant delivery invoice that was originally issued by the taxable person when the goods were delivered. Insurance, Registration, etc. as Reimbursements: The seller collects various amounts as a net agent such as insurance, registration fees, credit card usage charges, etc. GST will not be applicable on amounts collected as a net agent. However, if he collects amounts beyond the amounts incurred, then in that case GST would be charged equally. Abatement for the supply of used cars In terms of Notification No. 37/2017 Central Tax (Rate) & 38/2017 Integrated Tax (Rate) & 07/2017 Compensation Charge (Rate) dated 13/10/2017, goods falling under chapter 87 can avail of the benefit of paying GST rate @65% of taxable value only if the following conditions are fulfilled. The Motor Vehicle supplier is a registered person. Such supplier has purchased the Motor Vehicle before 1st July 2017 and has not availed input tax credit of Central Excise Duty, Value Added Tax, or any other taxes paid on such vehicles. Subject to the above conditions, a registered person dealing in the sale of a second-hand motor vehicle (which falls under Chapter 87) would be able to claim a rebate of 35% of the value of taxable supplies and pay GST on only 65% of the supply value of the such motor vehicle. Rule 32(5) of CGST Rules, 2017 Rule 32(5) deals with taxable supply provided by a person engaged in buying and selling second-hand goods. The rule states that if second-hand dealers supply second-hand goods after minor processing which does not change the nature of the goods, and if no input tax credit has been claimed on the purchase of such goods, then GST is applicable only on the difference between the selling price and the purchase price. If the value of such delivery is negative, it is not taken into account. Notice of exemption for the purchase of old and used cars According to Notice No. 10/2017 – Central Tax (Rate) & 4/2017 Compensation Tax (Rate) of 01.07.2017 exempts the domestic purchase of used goods from an unregistered person (Section 9(4) of the CGST Act) through a registered person engaged in the purchase and sale of used goods according to section 32(5) of the CGST Act 2017. FAQs Is GST applicable if I sell used vehicles as a business? Yes, if you are involved in the business of selling used motor vehicles, GST is applicable. You need to charge GST on the sale price of the used vehicle. Are there any exemptions for GST on the sale of used vehicles? Some countries may provide exemptions or lower rates for certain types of used vehicles or under specific conditions. It’s essential to check the local GST regulations for any such exemptions. Can I claim input tax credit on the purchase of used vehicles for resale? Yes, if you are a registered GST taxpayer selling used vehicles, you can claim input tax credit on the GST paid on the purchase of those vehicles for resale. Practice area’s of B K Goyal & Co LLP Income Tax Return Filing | Income Tax Appeal | Income Tax Notice | GST Registration | GST Return Filing | FSSAI Registration | Company Registration | Company Audit | Company Annual Compliance | Income Tax Audit | Nidhi Company Registration| LLP Registration | Accounting in India | NGO Registration | NGO Audit | ESG | BRSR | Private Security Agency | Udyam Registration | Trademark Registration | Copyright Registration | Patent Registration | Import Export Code | Forensic Accounting and Fraud Detection | Section 8 Company | Foreign Company | 80G and 12A Certificate

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Working capital

Business / CA Bhuvnesh Goyal / February 29, 2024

Working capital represents a company’s ability to pay its current liabilities with its current assets. This figure gives investors an indication of the company’s short-term financial health, capacity to clear its debts within a year, and operational efficiency. Working capital is the difference between a company’s current assets and current liabilities. The challenge here is determining the proper category for the vast array of assets and liabilities on a corporate balance sheet so as to decipher the overall health of a company and its ability to meet its short-term commitments. What Is Working Capital? Working capital, also known as net working capital (NWC), is the difference between a company’s current assets—such as cash, accounts receivable/customers’ unpaid bills, and inventories of raw materials and finished goods—and its current liabilities, such as accounts payable and debts. It’s a commonly used measurement to gauge the short-term health of an organization. Working capital estimates are derived from the array of assets and liabilities on a corporate balance sheet. By only looking at immediate debts and offsetting them with the most liquid of assets, a company can better understand what sort of liquidity it has in the near future.Working capital is also a measure of a company’s operational efficiency and short-term financial health. If a company has substantial positive NWC, then it could have the potential to invest in expansion and grow the company. If a company’s current assets do not exceed its current liabilities, then it may have trouble growing or paying back creditors. It might even go bankrupt. Working Capital Formula To calculate working capital, subtract a company’s current liabilities from its current assets. Both figures can be found in the publicly disclosed financial statements for public companies, though this information may not be readily available for private companies. Working Capital = Current Assets – Current Liabilities Working capital is often stated as a dollar figure. For example, say a company has $100,000 of current assets and $30,000 of current liabilities. The company is therefore said to have $70,000 of working capital. This means the company has $70,000 at its disposal in the short term if it needs to raise money for a specific reason.When a working capital calculation is positive, this means the company’s current assets are greater than its current liabilities. The company has more than enough resources to cover its short-term debt, and there is residual cash should all current assets be liquidated to pay this debt.When a working capital calculation is negative, this means the company’s current assets are not enough to pay for all of its current liabilities. The company has more short-term debt than it has short-term resources. Negative working capital is an indicator of poor short-term health, low liquidity, and potential problems paying its debt obligations as they become due.It is worth noting that negative working capital is not always a bad thing; it can be good or bad, depending on the specific business and its stage in its lifecycle; however, prolonged negative working capital can be problematic. Components of Working Capital Current Assets- Current assets are economic benefits that the company expects to receive within the next 12 months. The company has a claim or right to receive the financial benefit, and calculating working capital poses the hypothetical situation of the company liquidating all items below into cash. Cash and Cash Equivalents: All of the money the company has on hand. This includes foreign currency and certain types of investments such as money market accounts with very low risk and very low investment term periods. Inventory: All of the unsold goods being stored. This includes raw materials purchased to manufacture, partially assembled inventory that is in process, and finished goods that have not yet been sold. Accounts Receivable: All of the claims to cash for inventory items sold on credit. This should be included net of any allowance for doubtful payments. Notes Receivable: All of the claims to cash for other agreements, often agreed to through a physically signed agreement. Prepaid Expenses: All of the value for expenses paid in advance. Though it may be difficult to liquidate these in the event of needing cash, they still carry short-term value and are included. Others: Any other short-term asset. An example is some companies may recognize a short-term deferred tax asset that reduces a future liability. Current Liabilities- Current liabilities are simply all debts a company owes or will owe within the next twelve months. The overarching goal of working capital is to understand whether a company will be able to cover all of these debts with the short-term assets it already has on hand. Accounts Payable: All unpaid invoices to vendors for supplies, raw materials, utilities, property taxes, rent, or any other operating expense owed to an outside third party. Credit terms on invoices are often net 30 days, so essentially all invoices are captured here. Wages Payable: All unpaid accrued salary and wages for staff members. Depending on the timing of the company’s payroll, this may only accrue up to one month’s worth of wages (if the company only issues one paycheck per month). Otherwise, these liabilities are very short-term in nature. Current Portion of Long-Term Debt: All short-term payments related to long-term debt. Imagine a company finances its warehouse and owes monthly debt payments on the 10-year debt. The next 12 months of payments are considered short-term debt, while the remaining 9 years of payments are long-term debt. Only 12 months are included when calculating working capital. Accrued Tax Payable: All obligations to government bodies. These may be accruals for tax obligations for filings not due for months; however, these accruals are usually always short-term (due within the next 12 months) in nature. Dividend Payable: All authorized payments to shareholders. A company may decide to decline future dividend payments but must fulfill obligations on already authorized dividends. Unearned Revenue: All capital received in advance of having completed work. Should the company fail to complete the job, it may be forced to return capital back to the client. Limitations of Working Capital Working capital can be very insightful to determine a company’s short-term health. However, there are some downsides to

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