Question

From the following informations, calculate average payment period :
Total Purchases:- 2,00,000
Cash Purchases:- 20,000
Purchases Returns:- 34,000
Creditors at the end :- 70,000
B/P at the end:- 40,000
Reserve for discount on Creditors:-5000
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Answer 1

Answer:

Trade payable turnover ratio =

Net purchase / average trade payable

Net purchase = purchase - purchase return

=. 200000-34000

= 166000

As only closing trade payable do we cannot calculate average trade payable , we use closing trade payable

trade payable turnover ratio = 166000/110000

= 1.509

Average payment period = 365/ ratio

= 365/1.509

= 241.88

=. 242 days

Answer 2

Answer:

net credit purchase =Total purchase-cash purchase-purchase return

=200000-20000-34000

=146000

Average payable =70000+40000

Average payment period =Average total payable ×365÷Net credit purchase

=110000×365÷146000

=275 days