# 12th | Ts grewal 2021-2022 Question 96 to 100 | ch:4 Accounting Ratios

#### Question 96:

From the information given below, calculate Trade Receivables Turnover Ratio:
Credit Revenue from Operations, i.e., Credit Sales
State giving reason, which of the following would increase, decrease or not change Trade Receivables Turnover Ratio:
`40,000.
(ii) Credit Revenue from Operations, i.e., Credit Sales
`80,000.
(iii) Sales Return
`20,000.
(iv) Credit Purchase
`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

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

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

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.

#### 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.

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

#### 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.

=Credit Revenue from Operations/Average Trade Receivables

= 3,00,000/3= ` 1,00,000

1,00,000

=x+4x/2

#### ∴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

#### 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.

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

#### 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.