Question

Calculate Closing Trade Receivables from the following information:

Cost of Revenue from Operations	₹ 16,00,000
Gross Profit on Cost	25%
Cash Revenue from Operations	25% of Credit Revenue from Operations
Trade Receivables Turnover Ratio	5 Times

Closing Trade Receivables were 1.5 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 ₹ 16,00,000 = x − ₹ 16,00,000

`25/100 xx ₹ 16,00,000` = x − ₹ 16,00,000

₹ 4,00,000 = x − ₹ 16,00,000

x = ₹ 16,00,000 + ₹ 4,00,000

x (Revenue from Operations) = ₹ 20,00,000

Let the Credit Revenue from Operations be x.

Revenue from Operations = Credit Revenue from Operations + Cash Revenue from Operations

₹ 20,00,000 = x + `25/100` x

`125/100` x = ₹ 20,00,000

x = `(₹ 20,00,000 xx 100)/125`

x (Credit Revenue from Operations) = ₹ 16,00,000

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

5 = `(₹ 16,00,000)/"Average Trade Receivables"`

Average Trade Receivables = `(₹ 16,00,000)/5`

= ₹ 3,20,000

Let the Opening Trade Receivables be x.

Closing Trade Receivables = 1.5x

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

₹ 3,20,000 = `(x + 1.5x)/2`

₹ 3,20,000 × 2 = x + 1.5x

₹ 6,40,000 = 2.5x

`(₹ 6,40,000)/2.5` = x

x (Opening Trade Receivables) = ₹ 2,56,000

Closing Trade Receivables = ₹ 2,56,000 × 1.5

= ₹ 3,84,000