Question

Calculate the amount of Opening Trade Receivables and Closing Trade Receivables from the following:

Trade Receivables Turnover Ratio	10 times
Cost of Revenue from Operations	₹ 7,00,000
G.P. Ratio	30% of Revenue from Operations

You are informed that Closing Trade Receivables were three times than that in the beginning. Cash Revenue from Operations being 25% of Credit Revenue from Operations.

Answer 1

Let the Revenue from Operations be x.

Gross Profit = Revenue from Operations − Cost of Revenue from Operations

`30/100 x = x - 7,00,000`

`x - 30/100 x` = ₹ 7,00,000

`70/100 x` = ₹ 7,00,000

`x = (₹ 7,00,000 xx 100)/70`

Revenue from Operations `(x)` = ₹ 10,00,000

Let the Credit Revenue from Operations be x.

Revenue from Operations = Cash Revenue from Operations + Credit Revenue from Operations

₹ 10,00,000 = `25/100 x + x`

`125/100 x` = ₹ 10,00,000

`x = (₹ 10,00,000 xx 100)/125`

Credit Revenue from Operations `(x)` = ₹ 8,00,000

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

10 = `(₹ 8,00,000)/"Average Trade Receivables"`

Average Trade Receivables = `(₹ 8,00,000)/(10)`

= ₹ 80,000

Let the Opening Trade Receivable be x.

Closing Trade Receivables = `3x`

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

₹ 80,000 = `(x + 3x)/2`

x + 3x = ₹ 80,000 × 2

`4x` = ₹ 1,60,000

`x = (₹ 1,60,000)/4`

Opening Trade Receivable `(x)` = ₹ 40,000

Closing Trade Receivables = 3 × ₹ 40,000

= ₹ 1,20,000