Why change in inventory is deducted.
As Purchase = COGS + Ending inventory – Opening inventory
so, 500 +30 +25 (Creditor balance) = 555 should be the answer I think
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Here we need to calculate cash paid to supplier
COGS =500
Decrease in inventory =30
Decrease in Account Payable =25
Cash paid to supplier = 500-30+25=495
We need to substrate decrease in inventory because when inventory decrease this means we have sold the inventory and our cash increase and add decrease in account payable means we have paid to our creditors so cash is decreasing.