# 12th | Volume 3 | Chapter:4 | Question No. 86 to 90 | Accounting Ratio | Ts grewal Accounts Solution 2022-2023

#### Question 86:

Compute Trade Receivables Turnover Ratio from the following:

 31st March, 2020( `) 31st March, 2021( `) Revenue from Operations (Net Sales) 8,00,000 7,00,000 Debtors in the beginning of year 83,000 1,17,000 Debtors at the end of year 1,17,000 83,000 Sales Return 1,00,000 50,000

Average Debtors =Opening Debtors + Closing Debtors/2

In 2017 = 83,000 + 1,17,000/2 =  ` 1,00,000

In 2018 =  1,17,000 + 83,000/2 =  ` 1,00,000

Debtors Turnover Ratio = Net Sales/Average Debtors

In 2020         = 8,00,000/1,00,000 = 8 Times

In 2021        = 7,00,000/1,00,000 = 7 Times

#### Question 87:

Closing Trade Receivables `1,20,000, Revenue from Operations `14,40,000. Provision for Doubtful Debts `20,000. Calculate Trade Receivables Turnover Ratio.

Closing Trade Receivables =  ` 1,20,000
Revenue from Operations =
` 14,40,000
Since, opening trade receivables have not been given we assume closing trade receivables to be our average trade receivables. Also, the revenue from operations will be assumed to be revenue from net credit sales.
Trade Receivables Turnover Ratio = Credit Revenue from Operations/Average Credit receivables
= 14,40,000/1,20,000 = 12 times
Therefore, this higher ratio indicates the rate at which the firm is able to collect its debt efficiently.

#### Question 88:

Closing Trade Receivables  ` 4,00,000; Cash Sales being 25% of Credit Sales; Excess of Closing Trade Receivables over Opening Trade Receivables  ` 2,00,000; Revenue from Operations, i.e., Revenue from Operations, i.e., Net Sales  ` 15,00,000. Calculate Trade Receivables Turnover Ratio.

 Let Credit Sales be = x Cash Sales =25% of Credit Sale Cash Sales =x×25/100 =25x/100 Total Sales = Cash Sales + Credit Sales 15,00,000 =25x/100+x Or, 125x/100 =15,00,000 Or, x =15,00,000×100/125=12,00,000 Opening Trade Receivables = Closing Trade Receivables − 2,00,000 = 4,00,000 − 2,00,000 = 2,00,000 Average receivables = Opening Receivables +Closing Receivables/2 Average receivables = 2,00,000+4,00,000/2=3,00,000 Trade Receivables Turnover Ratio =Net Credit Sales/Average Trade Receivables  =12,00,000/3,00,000 =4

Therefore, Trades Receivable Turnover Ratio is 4 Times

#### Question 89:

A firm normally has trade Receivables equal to two months' credit Sales. During the coming year it expects Credit Sales of  ` 7,20,000 spread evenly over the year (12 months). What is the estimated amount of Trade Receivables at the end of the year?

 Debt collection period =12 Month/ Debtors turnover ratio 2 =12/ Debtors turnover ratio Debtors turnover ratio=6 Debtors turnover ratio = Credit sales / Debtors (Closing ) 6 =7,20,000/ Debtors (Closing ) Debtors (Closing ) =1,20,000

#### Question 90:

Mercury Ltd. made Credit Sales of `4,00,000 during the financial period. If the collection period is 36 days and year is assumed to be 360 days, calculate:

(iii) Trade Receivables at the end when Trade Receivables at the end are more than that in the beginning by ` 6,000.

Formula for calculating Trade Receivables Turnover Ratio

Trade Receivables Turnover Ratio = no. of year / collection period

Trade Receivables Turnover Ratio = 360 / 36 =10 Times

This formula is used for of calculating Trade Receivables Turnover Ratio = Credit revenue from operation / Average Trade Receivables

Trade Receivables Turnover Ratio= 4,00,000 / Average Trade Receivables = 10 Times

If Above formula is reversed, We can calculate Average Trade Receivables as follow;

Average Trade Receivables = 4,00,000/ 10 Times = 40,000

(iii) Trade Receivables at the end when Trade Receivables at the end are more than that in the beginning by ` 6,000.

Closing Trade Receivables = x + 6,000

Average receivables    = Opening Receivables +Closing Receivables/2

40,000 = x+x+6,000/2

Or,       80,000 = 2x+6,000

Or,              2x = 74,000

Or,                x = 37,000

Opening Trade Receivables = x = `37,000

Closing Trade Receivables = x + 6,000 = 43,000

Closing Trade Receivables =37,000 + 6,000 = 43,000