Question

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 1

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

`3 = 300000/"Average Trade Receivables"`

`"Average Trade Receivables" = 300000/3 = 100000`

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

`100000 = (x + 4x)/2`

So, x would be Rs 40000

∴Opening receivables would be Rs 40,000 and, 

Closing Receivables would be Rs 1,60,000 (40,000 × 4)

Revenue from Operations= `300000 + 25/75 xx 300000` = Rs 400000

Credit Revenue from Operations=Total Revenue from Operations−Cash Revenue from Operations

`x = 400000 - 1/3 x`

Credit Revenue from Operations=Rs 3,00,000