Question

calculate closing trade receivables from following information
cost of revenue from operation=1600000
gross profit on cost=25%
cash revenue from operation=25% of credit revenue from operation
Trade receivable turnover ratio=5times
Closing trade receivables were 1.5 times than that in the beginning

Answer 1

Explanation:

Answer

Trade Receivables Turnover Ratio = Net Credit Sales/Average Trade receivables

Trade Receivables Turnover Ratio =Rs.4,50,000/Rs.1,00,000=4.5

Average collection period

=

averagedailycreditsales

averageaccountsreceivable

Average daily credit sales =4,50,000/360

∗

=1,250

=1,00,000/1,250

=80 days

Therefore, on an average debtors take 80 days to pay

∗

360 days considered

Gross Profit Ratio

=GrossProfit/Sales×100

=(6,00,000−4,20,000)/6,00,000×100=30%

Working Notes:

(1) Credit Sales=Total sales - Cash sales

Cash Sales =25% of Rs.6,00,000=Rs.1,50,000

Credit Sales =Rs.6,00,000−Rs.1,50,000=Rs.4,50,000

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

=(Rs.60,000+Rs.1,40,000)/2

=Rs.1,00,000

Answer 2

Answer:

Closing Trade Receivable = Rs. 3,84,000

Explanation:

Solution :

• Cost of Revenue from operation= 16,00,000

Gross profit on cost = 25%

⇒ 16,00,000 × (25/100)

⇒ 400,000

Gross profit = 400,000

Sales = Cost of Revenue from operation + Gross profit

Sales = 16,00,000 + 400,000

Sales = 20,00,000

Let,

• Credit Revenue from Operations = x
• Cash Revenue from Operations = 25x/100

Sales (Revenue from Operations) = Cash Revenue from Operations + Credit Revenue from Operations

⇒ 20,00,000 = x + 25x/100

⇒ 20,00,000 = x + 0.25

⇒ 20,00,000 = 1.25x

⇒ x = 20,00,000/1.25

⇒ x = 16,00,000

Credit Revenue from Operations = Rs 16,00,000

★ Trade Receivable Turnover Ratio =

$\dfrac{Credit \: Revenue \: from \: Operations}{Average \: Receivable}$

$5 \: = \: \dfrac{16,00,000}{Average \: Receivable}$

Average Receivable = 16,00,000/5

Average Receivable = 3,20,000

★ Average Receivable =

$\dfrac{Ope.ning \: Trade \: Receivable \: + \: Closing \: Trade \: Receivable}{2}$

Let,

• Opening Trade Receivable = x
• Closing Trade Receivable = 1.5x

• Average Receivable =

$\dfrac{Ope.ning \: Trade \: Receivable \: + \: Closing \: Trade \: Receivable}{2}$

$3,20,000 \: = \: \dfrac{x \: + \: 1.5x}{2}$

⇒3,20,000 × 2 = x + 1.5x

⇒ 6,40,000 = 2.5x

⇒ x = 6,40,000 / 2.5x

⇒ x = 2,56,000

Opening Trade Receivable = Rs. 2,56,000

• Closing Trade Receivable = 1.5x

⇒ 1.5 × 2,56,000

⇒ 3,84,000

Closing Trade Receivable = Rs.  3,84,000

Therefore, Closing Trade Receivable =  Rs. 3,84,000