Page No
4.114:
Question
96:
From the information given below, calculate Trade
Receivables Turnover Ratio:
Credit Revenue from Operations, i.e., Credit Sales `8,00,000;
Opening Trade Receivables
`1,20,000; and Closing Trade Receivables `2,00,000.
State giving reason, which of the following would increase, decrease or not
change Trade Receivables Turnover Ratio:
(i) Collection from Trade Receivables `40,000.
(ii) Credit Revenue from Operations, i.e., Credit Sales `80,000.
(iii) Sales Return
`20,000.
(iv) Credit Purchase
`1,60,000.
Answer:
Average Trade receivables= Opening
Trade Receivables +Closing Trade Receivables/2
Average Trade receivables=
1,20,000+2,00,000/2=1,60,000
Trade receivable turnover ratio= Net sales/
Average receivables
Trade receivable turnover ratio= 8,00,000/1,60,000= 5 Times
(i) Collection from
Trade Receivables ` 40,000-
Increase
Reason: Collection from Trade Receivables will result in decrease in the amount of closing Trade Receivables which will reduce the amount of average Trade Receivables.
Closing Trade Receivables = 2,00,000 − 40,000 = ` 1,60,000
Average Trade receivables= Opening Trade
Receivables +Closing Trade Receivables/2
Average Trade receivables=
1,20,000+1,60,000/2=1,40,000
Trade receivable turnover ratio= Net sales/
Average receivables
Trade receivable turnover ratio= 8,00,000/1,40,000= 5.71
Times (Increased from 5 to 5.71 times)
(ii) Credit Revenue
from Operations, i.e. Sales ` 80,000- Decrease
Reason: This transaction will result in increase in both credit sales as well as closing Trade Receivables. Increase in closing Trade Receivables, in turn, will lead to an increase in the average Trade Receivables.
Credit Sales = 8,00,000 + 80,000 = ` 8,80,000
Closing Trade Receivables = 2,00,000 + 80,000 = ` 2,80,000
Average Trade receivables= Opening Trade
Receivables +Closing Trade Receivables/2
Average Trade receivables=
1,20,000+2,80,000/2=2,00,000
Trade receivable turnover ratio= Net sales/
Average receivables
Trade receivable turnover ratio= 8,80,000/2,00,000= 4.4 Times
(iii) Sales Return ` 20,000- Increase
Reason: This transaction will result in decrease in both sales and average Trade Receivables.
Credit Sales = 8,00,000 − 20,000= ` 7,80,000
Closing Trade Receivables = 2,00,000 − 20,000 = ` 1,80,000
Average Trade receivables= Opening
Trade Receivables +Closing Trade Receivables/2
Average Trade receivables=
1,20,000+1,80,000/2=1,50,000
Trade receivable turnover ratio= Net sales/
Average receivables
Trade receivable turnover ratio= 1,80,000/1,50,000= 5.2 Times
(iv) Credit Purchase
` 1,60,000- No Change
Reason: Credit Purchase does not affect the Debtors Turnover Ratio.
Page No
4.114:
Question
97:
` 1,75,000 is the Credit Revenue from Operations, i.e., Net Credit Sales of an enterprise. If Trade Receivables Turnover Ratio is 8 times, calculate Trade Receivables in the Beginning and at the end of the year. Trade Receivables at the end is ` 7,000 more than that in the beginning.
Answer:
Trade receivable turnover ratio= Net sales/
Average receivables
8=1, 75,000/
Average receivables
Average
receivables= 27,875
Let Opening Trade Receivables = x
∴ Closing Trade Receivables = x
+ 7,000
Average receivables= Opening Receivables
+Closing Receivables/2
21,875=x+x+7000/2
Or, 43,750=2x+7,000
Or, 2x=36,750
Or, x=18,375
∴ Opening Trade Receivables = x = 18,375
Closing Trade Receivables = x +7,000 = 25,375
Page No
4.114:
Question
98:
From the following information, calculate Opening and
Closing Trade Receivables, if Trade Receivables Turnover Ratio is 3 Times:
(i) Cash Revenue from Operations is 1/3rd of Credit Revenue from Operations.
(ii) Cost of Revenue from Operations is `3,00,000.
(iii) Gross Profit is 25% of the Revenue from Operations.
(iv) Trade Receivables at the end are 3 Times more than that of in the
beginning.
Answer:
|
Trade Receivable Turnover Ratio |
=Credit Revenue from Operations/Average Trade Receivables |
|
3 |
=3,00,000
/Average Trade Receivables |
|
Average Trade Receivables |
= 3,00,000/3=
` 1,00,000 |
|
Average Trade Receivables |
=Opening Trade Receivables
+ Closing Trade Receivables/2 |
|
1,00,000 |
=x+4x/2
|
So, x would be `40,000
|
|
∴Opening receivables would be
` 40,000 and, Closing Receivables would be
`1,60,000(40,000×4)
|
|
|
Revenue from Operations |
=3,00,000+25/75×3,00,000=
` 4,00,000 |
|
Credit Revenue from Operations |
=Total Revenue from Operations
− Cash Revenue from Operations |
|
x |
=4,00,000-1/3x |
|
Credit Revenue from Operations |
=
` 3,00,000 |
Page No
4.199:
Question
99:
Cash Revenue from Operations (Cash Sales) `
2,00,000, Cost of Revenue from Operations or Cost of Goods Sold `
3,50,000; Gross Profit
` 1,50,000; Trade Receivables Turnover Ratio 3 Times.
Calculate Opening and Closing Trade Receivables in each of the following
alternative cases;
Case 1 : If Closing Trade Receivables were ` 1,00,000 in
excess of Opening Trade Receivables.
Case 2 : If trade Receivables at the end were 3 times than in the beginning.
Case 3 ; If Trade Receivables at the end were 3 times more than that of in the
beginning.
Answer:
Total Sales = Cost of Goods Sold + Gross Profit
= 3,50,000 + 1,50,000 = 5,00,000
Credit Sales = Total Sales − Cash Sales
= 5,00,000 − 2,00,000 = 3,00,000
|
trade receivable turnover ratio |
= Net Credit sales / Average trade receivable |
|
3 |
= 3,00,000/ Average trade receivable |
|
Average trade receivable |
= 1,00,000 |
Case 1:
Let Opening Trade Receivables = x
Closing Trade Receivables = x + 1,00,000
|
Average trade receivable |
= Opening trade receivable +Closing trade receivable/2 |
|
1,00,000 |
= x+x+1,00,000/2 |
|
Or, 2,00,000 |
= 2x+1,00,000 |
|
Or, 2x |
= 1,00,000 |
|
Or, x |
= 50,000 |
Opening Trade Receivables = x = ` 50,000
Closing Trade Receivables = x + 1,00,000 = 50,000 + 1,00,000 = ` 1,50,000
Case 2:
Let Opening Trade Receivables = x
Closing Trade Receivables = 3 x
|
Average trade receivable |
= Opening trade receivable +Closing trade receivable/2 |
|
1,00,000 |
= x+x3/2 |
|
Or, 2,00,000 |
= 4x |
|
Or, x |
= 50,000 |
Opening Trade Receivables = x = ` 50,000
Closing Trade Receivables = 3x = 3 × 50,000 = ` 1,50,000
Case 3:
Let Opening Trade Receivables = x
Closing Trade Receivables = x + 3 x = 4x
|
Average trade receivable |
= Opening trade receivable +Closing trade receivable/2 |
|
1,00,000 |
= x+4x/2 |
|
Or, 2,00,000 |
= 5x |
|
Or, x |
= 40,000 |
Opening Trade Receivables = x = ` 40,000
Closing Trade Receivables = 4 x = 4 × 40,000 = ` 1,60,000
page No
4.115:
Question
100:
Calculate Trade Payables Turnover Ratio and Average Debt
payment Period from the following information:
|
|
1st April, 2020 |
31st March, 2021 |
|
Sundry
Creditors |
1,50,000 |
4,50,000 |
|
Bills
Payable |
50,000 |
1,50,000 |
Total Purchases ` 21,00,000; Purchases Return ` 1,00,000; Cash Purchases ` 4,00,000.
Answer:
Average Trade Payables
|
=
Opening Creditors & B/P + Closing Creditors & B/P÷2
|
|
|
=
1,50,000 + 50,000 + 4,50,000 + 1,50,000÷2
|
|
|
= ` 4,00,000
|
Net Credit Purchases
|
=
Total Purchases - Purchases Return - Cash Purchases
|
|
|
=
21,00,000 - 1,00,000 - 4,00,000 = ` 16,00,000
|
Trade Payables Turnover Ratio
|
=
Net Credit Purchases /
Average Trade Payables
=
16,00,000/4,00,000 = 4 times
|
Average Debt Payment Period
|
= 12
Trade Payable Turnover Ratio
|
|
|
=
12/4
= 3 months
|
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