Question

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

Cost of Revenue from Operations	₹ 9,00,000
Gross Profit on Revenue from Operations	25%
Cash Revenue from Operations	20% of Credit Revenue from Operations
Trade Receivables Turnover Ratio	5 Times

Closing Trade Receivables were 3 times than that in the beginning.

Answer 1

Let the Revenue from Operations be x.

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

25% of x = x − ₹ 9,00,000

x − `25/100` x = ₹ 9,00,000

`75/100` x = ₹ 9,00,000

x = `(₹ 9,00,000 xx 100)/75`

x (Revenue from Operations) = ₹ 12,00,000

Let the Credit Revenue from Operations be x.

Revenue from Operations = Credit Sales + Cash Sales

₹12,00,000 = x + `20/100` x

`120/100` x = ₹ 12,00,000

x = `(₹ 12,00,000 xx 100)/120`

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

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

5 = `(₹ 10,00,000)/"Average Trade Receivables"`

Average Trade Receivables = `(₹ 10,00,000)/5`

= ₹ 2,00,000

Let the Opening Trade Receivables be x.

Closing Trade Receivables = 3x

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

₹ 2,00,000 = `(x + 3x)/2`

₹ 2,00,000 × 2 = 4x

₹ 4,00,000 = 4x

x = `(₹ 4,00,000)/4`

x (Opening Trade Receivables) = ₹ 1,00,000

Closing Trade Receivables = ₹ 1,00,000 × 3

= ₹ 3,00,000