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Question
Calculate Trade Payables Turnover Ratio from the following:
| ₹ | |
| Total Purchases | 24,00,000 |
| Cash Purchases | 6,40,000 |
| Purchases Returns (out of credit purchases) | 60,000 |
| Opening Balance of Creditors | 3,00,000 |
| Opening Balance of Bills Payable | 20,000 |
| Closing Balance of Creditors | 3,50,000 |
| Closing Balance of Bills Payable | 10,000 |
Numerical
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Solution
Trade Payables Turnover Ratio = `"Net Credit Purchases"/"Average Creditors + Average B/P"`
Net Credit Purchases = Total Purchases − Cash Purchases − Purchases Returns
= ₹ 24,00,000 − ₹ 6,40,000 − ₹ 60,000
= ₹ 17,00,000
Average Creditors and B/P = `(₹ 3,00,000 + ₹ 3,50,000 + ₹ 20,000 + ₹ 10,000)/2`
= `(₹ 6,80,000)/2`
= ₹ 3,40,000
Trade Payables Turnover Ratio = `(₹ 17,00,000)/(₹ 3,40,000)`
= 5 Times
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