Question

credit purchases rs. 300000, creditors at the beginning rs. 20000, bills payable at the beginning rs. 8000. creditors at the end rs. 12000, bill payable at the end rs. 20000 and reserve for discount on the creditors rs 10000. calculate creditor turnover ratio and average payment period/ average age of creditors

Answer 1

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