Question

From the following information, calculate Opening Trade Receivables and Closing Trade Receivables:

Trade Receivables Turnover Ratio - 4 times

Closing Trade Receivables were ₹ 20,000 more than that in the beginning.

Cost of Revenue from operations - ₹ 6,40,000.

Cash Revenue from operations `1/3`rd of Credit Revenue from Operations Gross Profit Ratio - 20%

Answer 1

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

(Given) = `(₹ 6,00,000)/"Average Trade Receivables"`

Average Trade Receivables = `(₹ 6,00,000)/4`

= ₹ 1,50,000

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

Let, Opening Trade Receivable = y

₹ 1,50,000 = `(y + y  + ₹ 20,000)/2`

2y = ₹ 2,80,000

y = ₹ 1,40,000

= ₹ 1,40,000 + ₹ 20,000

= ₹ 1,60,000 [opening]; closing trade receivable

y = ₹ 1,40,000

Note 1: Revenue from operations = Credit Revenue from Operations

(Let credit sale = x)

₹ 8,00,000 = x + `x/3`

x = `(₹ 8,00,000xx3)/4`

=  `(₹24,00,000)/4`

(Credit Revenue from operations) x = ₹ 6,00,000

Note 2: Revenue from operations = Cost of Revenue from operations + Gross Profit

= ₹ 6,40,000 (Given) + `(₹6,40,000xx20/80)`

= ₹ 6,40,000 + ₹ 1,60,000

= ₹ 8,00,000