Question

A firm makes Credit Revenue from Operations of ₹ 2,40,000 during the year. If the Trade Receivables Turnover Ratio is 8 times, calculate Closing Debtors if the Closing Debtors are more by ₹ 6,000 than the Opening Debtors.

Options

• ₹ 33,000

• ₹ 36,000

• ₹ 24,000

• ₹ 27,000

Answer 1

₹ 33,000

Explanation:

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

8 = `(2,40,000)/"Average Trade Receivable"`

Average Trade Receivable = `(2,40,000)/8`

= ₹ 30,000

Let the Opening Debtors be x.

Closing Debtors = `x + 6,000`

Average Trade Receivable = `("Opening Debtors" + "Closing Debtors​")/2`

30,000 = `(x + x + 6,000)/2`

30,000 = `(2x + 6,000)/2`

30,000 × 2 = 2x + 6,000

60,000 = 2x + 6,000

`2x` = 60,000 − 6,000

`2x` = 54,000

`x` = `(54,000)/2`

Opening Debtors `(x)` = ₹ 27,000

Closing Debtors = Opening Debtors + 6,000

= 27,000 + 6,000

= ₹ 33,000