Question

The total debtors of X Ltd. were 9,00,000. It had created a provision of
10% for bad and doubtful debts. What amou
So what amount of debtors will be used for
calculating the “Trade Receivables Turnover Ratio"?
1
3
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Answer 1

The question is explained below.

Explanation:

Trade receivable turnover ration indicates the relationship between the credit revenue and the average trade receivable during the year. we can calculate the trade receivable turnover ratio by dividing Net credit revenue from operation from Average trade receivable.

For calculating Trade receivable turnover ratio we will not deduct provision for bad and doubtful debts from total trade receivable. We do not deduct the provision because otherwise it will give false impression that the trade receivable are collected quickly.