Question

A Company made Credit Revenue from Operations (Credit Sales) of ₹ 8,76,000 during the year ended 31st March, 2023. If Trade Receivables Turnover Ratio is 18.25 times calculate:

1. Average Trade Receivables.
2. Closing Trade Receivables, if closing Trade Receivables are three times in comparison to opening Trade Receivables.

Answer 1

(I)

Trade Receivables Turnover Ratio = `"Credit Revenue from Operations"/"Average Trade Receivables"`

18.25 = `(₹ 8,76,000)/"Average Trade Receivables"`

Average Trade Receivables = `(₹ 8,76,000)/18.25`

= ₹ 48,000

(II)

Let the Opening Trade Receivables be x.

Closing Trade Receivables = 3x

Average Trade Receivables = `("Opening Trade Receivable" + "Closing Trade Receivables")/2`

₹ 48,000 = `(x + 3x)/2`

₹ 48,000 × 2 = x + 3x

₹ 96,000 = 4x

x = `(₹ 96,000)/4`

x (Opening Trade Receivable) = ₹ 24,000

Closing Trade Receivables = ₹ 24,000 × 3

= ₹ 72,000