Question

from the following information calculate debtors turnover ratios :opening debtors 40000 , closing debtors 50000 , credit sale 225000, cash sales 175000 , provision for doubtful debts :opening 4000 , closing 5000

Answer 1

Debtors turnover ratio = Credit sales / average debtors

credit sales = 2,25,000

Average debtors :

Opening debtors 40,000

Add: Provision opening 4,000

Add: Closing debtors 50,000

Add Provision closing 5,000

=99000

average debtors =99000/2

=49500

debtors turnover = credit sales / average debtors

=225000/49500

= 4.54

Debtors turnover ratio = 4.54 times

Hope its useful..

Answer 2

Given
opening debtors 40000

closing debtors 50000

credit sale 225000

cash sales 175000

provision for doubtful debts
opening 4000 , closing 5000

We know that
Debtors Turnover ratio = Credit sales/average Debtors

Given Credit sales=22500

Average Debtors= (Opening Debtors + provision For doubtful debts Opening balance - provision For doubtful debts closing balance + closing Debtors)/2

=(40000 +4000 - 5000 + 50000)/2

=44500

Debtors turnover ratio
=225000/44500
=5.05