Question

53. (Opening Creditors when Trade Payable T/O Ratio & Closing Creditors are given)
From the following information, calculate creditors at the beginning of the year:
Total purchases
Cash purchases (included in above)
Trade Payable turnover ratio-4 times Creditors (closing)
Ans. 3,50,000)
22,00,000
10,00,000
2,50,000​

Answer 1

Explanation:

Average accounts payable = (Rs. 4,00,000 + Rs. 2,00,000)/2

= Rs. 3,00,000

Credit turnover ratio = Net credit purchases/Average accounts payable

= Rs. 12,00,000/Rs. 3,00,000

= 4 Times