Question

₹ 1,75,000 is the Credit Revenue from Operations, i.e., Net Credit Sales of an enterprise. If Trade Receivables Turnover Ratio is 8 times, calculate Trade Receivables in the Beginning and at the end of the year. Trade Receivables at the end is ₹ 7,000 more than that in the beginning.

Answer 1

Trade Receivable Turnover Ratio = `"Net Credit Sales"/"Average Trade Receivables"`

`8 = 175000/ "Average Trade Receivable"`

Average Trade Receivable = Rs 21875

Let Opening Trade Receivables = x

∴ Closing Trade Receivables = x + 7,000 

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

`21875 = (x + x + 7000)/2`

or, 43750 = 2x + 7000

or , 2x = 36750

or, x = Rs 18375

∴ Opening Trade Receivables = x = 18,375

Closing Trade Receivables = x +7,000 = 25,375