Question

Credit Revenue from Operations (Credit Sales) of X Ltd. during the year ended 31st March, 2023 were ₹ 5,64,000. If trade receivables turnover ratio is 6 times, calculate trade receivables in the beginning and at the end of the year. Trade Receivables at the end were ₹ 10,000 more than that at the beginning of the year.

Answer 1

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

6 = `(₹ 5,64,000)/"Average Trade Receivables"`

Average Trade Receivables = `(₹ 5,64,000)/6`

= ₹ 94,000

Let the Opening Trade Receivables be x.

Closing Trade Receivables = x + ₹ 10,000

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

₹ 94,000 = `(x + x + ₹ 10,000)/2`

₹ 94,000 × 2 = 2x + ₹ 10,000

₹ 1,88,000 = 2x + ₹ 10,000

2x = ₹ 1,88,000 − ₹ 10,000

x = `(₹ 1,78,000)/2`

x (Opening Trade Receivables) = ₹ 89,000

Closing Trade Receivables = ₹ 89,000 + ₹ 10,000

= ₹ 99,000