Question 101:
Compute Trade Receivables Turnover Ratio from the following:

31st March, 2022( `) 
31st March, 2023( `) 
Revenue from Operations (Net Sales) 
8,00,000 
7,00,000 
Debtors in the beginning of year 
83,000 
1,17,000 
Debtors at the end of year 
1,17,000 
83,000 
Sales Return 
1,00,000 
50,000 
Answer:
Average Debtors =Opening Debtors + Closing Debtors/2
In 2022 = 83,000 + 1,17,000/2 = ` 1,00,000
In 2023 = 1,17,000 + 83,000/2 = ` 1,00,000
Debtors Turnover Ratio = Net Sales/Average Debtors
In 2022 = 8,00,000/1,00,000 = 8 Times
In 2023 = 7,00,000/1,00,000 = 7 Times
Question 102:
Closing Trade Receivables `1,20,000, Revenue from Operations `14,40,000. Provision for Doubtful Debts `20,000. Calculate Trade Receivables Turnover Ratio.
Answer:
Closing Trade Receivables = ` 1,20,000
Revenue from Operations = ` 14,40,000
Since, opening trade receivables have not been given we assume closing trade
receivables to be our average trade receivables. Also, the revenue from
operations will be assumed to be revenue from net credit sales.
Trade Receivables Turnover Ratio = Credit Revenue from Operations/Average
Credit receivables
= 14,40,000/1,20,000 = 12 times
Therefore, this higher ratio indicates the rate at which the firm is able to
collect its debt efficiently.
Question 103:
Closing Trade Receivables ` 4,00,000; Cash Sales being 25% of Credit Sales; Excess of Closing Trade Receivables over Opening Trade Receivables ` 2,00,000; Revenue from Operations, i.e., Revenue from Operations, i.e., Net Sales ` 15,00,000. Calculate Trade Receivables Turnover Ratio.
Answer:
Let Credit Sales be 
= x 
Cash Sales 
=25% of Credit Sale 
Cash Sales 
=x×25/100 =25x/100 
Total Sales 
= Cash Sales + Credit Sales 
15,00,000 
=25x/100+x 
Or, 125x/100 
=15,00,000 
Or, x 
=15,00,000×100/125=12,00,000 
Opening Trade Receivables

= Closing Trade Receivables − 2,00,000 = 4,00,000 − 2,00,000 = 2,00,000 
Average receivables 
= Opening Receivables +Closing Receivables/2 
Average receivables 
= 2,00,000+4,00,000/2=3,00,000 
Trade Receivables Turnover Ratio

=Net Credit Sales/Average Trade Receivables =12,00,000/3,00,000 =4 
Therefore, Trades Receivable Turnover Ratio is 4 Times
Question 104:
A firm normally has trade Receivables equal to two months' credit Sales. During the coming year it expects Credit Sales of ` 7,20,000 spread evenly over the year (12 months). What is the estimated amount of Trade Receivables at the end of the year?
Answer:
Debt collection period 
=12 Month/ Debtors turnover ratio 
2 
=12/ Debtors turnover ratio 
Debtors turnover ratio=6 

Debtors turnover ratio 
= Credit sales / Debtors (Closing ) 
6 
=7,20,000/ Debtors (Closing ) 
Debtors (Closing ) 
=1,20,000 
Question 105:
Mercury Ltd. made Credit Sales of `4,00,000 during the financial period. If the collection period is 36 days and year is assumed to be 360 days, calculate:
(i) Trade Receivables Turnover Ratio;
(ii) Average Trade Receivables;
(iii) Trade Receivables at the end when Trade Receivables at the end are more than that in the beginning by ` 6,000.
Answer:
(i) Trade Receivables Turnover Ratio;
Formula for calculating Trade Receivables Turnover Ratio
Trade Receivables Turnover Ratio = no. of year / collection period
Trade Receivables Turnover Ratio = 360 / 36 =10 Times
(ii) Average Trade Receivables;
This formula is used for of calculating Trade Receivables Turnover Ratio = Credit revenue from operation / Average Trade Receivables
Trade Receivables Turnover Ratio= 4,00,000 / Average Trade Receivables = 10 Times
If Above formula is reversed, We can calculate Average Trade Receivables as follow;
Average Trade Receivables = 4,00,000/ 10 Times = 40,000
(iii) Trade Receivables at the end when Trade Receivables at the end are more than that in the beginning by ` 6,000.
∴ Closing Trade Receivables = x + 6,000
Average receivables = Opening Receivables +Closing Receivables/2
40,000 = x+x+6,000/2
Or, 80,000 = 2x+6,000
Or, 2x = 74,000
Or, x = 37,000
∴ Opening Trade Receivables = x = `37,000
Closing Trade Receivables = x + 6,000 = 43,000
Closing Trade Receivables =37,000 + 6,000 = 43,000
Ts Grewal Solution 20232024
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Class 12 / Volume – I
Chapter 3 – Accounting Ratio