Question

Credit revenue from operations 6,00,000; Trade receivables Turnover Ratio 5; Calculate opening Debtors, if closing debtors are two times in comparison to opening debtors. (a) 1,20,000 (b) 80,000 (c) 1,60,000 (d) 2,40,000​

Answer 1

Explanation:

Credit revenue from operations 6,00,000; Trade receivables Turnover Ratio 5; Calculate opening Debtors, if closing debtors are two times in comparison to opening debtors. (a) 1,20,000 (b) 80,000 (c) 1,60,000 (d

Answer 2

ANSWER :

❖ Option (b) 80,000

• ✎ If Credit Revenue from Operations Is Rs. 6,00,000; Trade Receivables Turnover Ratio is 5 and Closing Debtors are two times in comparison to Opening Debtors; then the Opening Debtors will be Rs. 80,000.

________________________________________________________

SOLUTION :

❒ Given :-

• Credit Revenue from Operations = Rs. 6,00,000.

• Trade Receivables Turnover Ratio = 5.

• Closing debtors are two times in comparison to Opening debtors.

❒ To Calculate :-

• Opening Debtors = ?

❒ Required Formulas :-

• $\dag \: \: \underline{ \boxed{ \sf{Trade \: \: Receivables \: \: Turnover \: \: Ratio = \dfrac{Credit \: \: Revenue \: \: from \: \: Operation}{Average \: \: Trade \: \: Receivable}}}}$

• $\dag \: \: \underline{ \boxed{ \sf {Average \: \: Trade \: \: Receivable = \dfrac{ O pening \: \: Debtors + Closing \: \: Debtors}{ 2}}}}$

____________________________________________

❒ Calculation :-

It is given that,

• Credit Revenue from Operations = Rs. 6,00,000
• Trade Receivables Turnover Ratio = 5

Using the formula of Trade Receivables Turnover Ratio, we get,

• $\bigstar \: \: \rm{Trade \: \: Receivables \: \: Turnover \: \: Ratio = \dfrac{Credit \: \: Revenue \: \: from \: \: Operation}{Average \: \: Trade \: \: Receivable}}$

$\implies \: \rm{5 = \dfrac{6,00,000}{Average \: \: Trade \: \: Receivable}}$

$\implies \: \rm{Average \: \: Trade \: \: Receivable \: = \dfrac{6,00,000}{5}}$

$\implies \: \rm{Average \: \: Trade \: \: Receivable \: = 1,20,000 }$

Now,

• Average Trade Receivables = Rs. 1,20,000

Again,

• Closing debtors are two times in comparison to Opening debtors.

Suppose,

• Opening debtor = x

Then,

• Closing debtor = 2x

Using the formula of Average Trade Receivables, we obtain,

• $\bigstar \: \: \tt{Average \: \: Trade \: \: Receivable = \dfrac{ O pening \: \: Debtors + Closing \: \: Debtors}{ 2}}$

$\longrightarrow \: \tt{1,20,000 = \dfrac{x + 2x}{2}}$

$\longrightarrow \: \tt{1,20,000 = \dfrac{3x}{2}}$

$\longrightarrow \: \tt{3x = 1,20,000 \times 2}$

$\longrightarrow \: \tt{3x = 2,40,000}$

$\longrightarrow \: \tt{x= \dfrac{2,40,000}{3}}$

$\therefore \: \tt{\underline{x = 80,000}}$

Hence,

• Opening Debtor = Rs. 80,000