Question 106:
From the information given below, calculate Trade Receivables
Turnover Ratio:
Credit Revenue from Operations, i.e., Credit Sales ₹8,00,000; Opening
Trade Receivables ₹1,20,000; and Closing Trade Receivables ₹2,00,000.
State giving reason, which of the following would increase, decrease or not
change Trade Receivables Turnover Ratio:
(i) Collection from Trade Receivables ₹40,000.
(ii) Credit Revenue from Operations, i.e., Credit Sales ₹80,000.
(iii) Sales Return ₹20,000.
(iv) Credit Purchase ₹1,60,000.
Answer:
Average Trade receivables= Opening Trade
Receivables +Closing Trade Receivables/2
Average Trade receivables=
1,20,000+2,00,000/2=1,60,000
Trade
receivable turnover ratio= Net sales/ Average
receivables
Trade receivable turnover ratio= 8,00,000/1,60,000= 5 Times
(i) Collection from
Trade Receivables ₹40,000- Increase
Reason: Collection from Trade Receivables will result in decrease
in the amount of closing Trade Receivables which will reduce the amount of
average Trade Receivables.
Closing Trade Receivables = 2,00,000 − 40,000 = ₹1,60,000
Average Trade receivables= Opening Trade
Receivables +Closing Trade Receivables/2
Average Trade receivables=
1,20,000+1,60,000/2=1,40,000
Trade
receivable turnover ratio= Net sales/ Average
receivables
Trade receivable turnover ratio= 8,00,000/1,40,000= 5.71
Times (Increased from 5 to 5.71 times)
(ii) Credit Revenue
from Operations, i.e. Sales ₹80,000- Decrease
Reason: This transaction will result in increase in both credit
sales as well as closing Trade Receivables. Increase in closing Trade
Receivables, in turn, will lead to an increase in the average Trade
Receivables.
Credit Sales = 8,00,000 + 80,000 = ₹8,80,000
Closing Trade Receivables = 2,00,000 + 80,000 = ₹2,80,000
Average Trade receivables= Opening Trade
Receivables +Closing Trade Receivables/2
Average Trade receivables=
1,20,000+2,80,000/2=2,00,000
Trade
receivable turnover ratio= Net sales/ Average
receivables
Trade receivable turnover ratio= 8,80,000/2,00,000= 4.4 Times
(iii) Sales Return
₹20,000- Increase
Reason: This transaction will result in decrease in both sales and
average Trade Receivables.
Credit Sales = 8,00,000 − 20,000= ₹7,80,000
Closing Trade Receivables = 2,00,000 − 20,000 = ₹1,80,000
Average Trade receivables= Opening Trade
Receivables +Closing Trade Receivables/2
Average Trade receivables=
1,20,000+1,80,000/2=1,50,000
Trade
receivable turnover ratio= Net sales/ Average
receivables
Trade receivable turnover ratio= 1,80,000/1,50,000= 5.2 Times
(iv) Credit Purchase
₹1,60,000- No Change
Reason: Credit Purchase does not affect the Debtors Turnover Ratio
Calculation of Opening and
closing Trade Receivables
Question 107:
₹1,75,000 is the
Credit Revenue from Operations, i.e., Net Credit Sales of an
enterprise. If Trade Receivables Turnover Ratio is 8 times, calculate Trade
Receivables in the Beginning and at the end of the year. Trade Receivables at
the end is ₹7,000 more than that in the beginning.
Answer:
Trade
receivable turnover ratio= Net sales/ Average
receivables
8=1,
75,000/ Average receivables
Average receivables= 27,875
Let Opening Trade Receivables = x
∴ Closing Trade Receivables = x + 7,000
Average receivables= Opening Receivables
+Closing Receivables/2
21,875=x+x+7000/2
Or, 43,750=2x+7,000
Or, 2x=36,750
Or, x=18,375
∴ Opening Trade Receivables = x = 18,375
Closing Trade Receivables = x +7,000 = 25,375
Question 108:
From the following information, calculate Opening and Closing
Trade Receivables, if Trade Receivables Turnover Ratio is 3 Times:
(i) Cash Revenue from Operations is 1/3rd of Credit Revenue from Operations.
(ii) Cost of Revenue from Operations is ₹3,00,000.
(iii) Gross Profit is 25% of the Revenue from Operations.
(iv) Trade Receivables at the end are 3 Times more than that of in the
beginning.
Answer:
|
Trade Receivable Turnover Ratio |
=Credit Revenue from Operations/Average Trade Receivables |
|
3 |
=3,00,000
/Average Trade Receivables |
|
Average Trade Receivables |
= 3,00,000/3= ₹1,00,000 |
|
Average Trade Receivables |
=Opening Trade Receivables
+ ClosingTrade Receivables/2 |
|
1,00,000 |
=x+4x/2 |
So, x would be
₹40,000
|
|
∴Opening receivables would be
₹40,000 and, Closing Receivables would be
₹1,60,000(40,000×4)
|
|
|
Revenue from Operations |
=3,00,000+25/75×3,00,000= ₹4,00,000 |
|
Credit Revenue from Operations |
=Total Revenue from Operations
− Cash Revenue from Operations |
|
x |
=4,00,000-1/3x |
|
Credit Revenue from Operations |
= ₹3,00,000 |
Question 109:
Cash Revenue from Operations (Cash Sales) ₹2,00,000,
Cost of Revenue from Operations or Cost of Goods Sold ₹3,50,000; Gross
Profit ₹1,50,000; Trade Receivables Turnover Ratio 3 Times. Calculate
Opening and Closing Trade Receivables in each of the following alternative
cases;
Case 1 : If Closing Trade Receivables were ₹1,00,000 in excess of Opening
Trade Receivables.
Case 2 : If trade Receivables at the end were 3 times than in the beginning.
Case 3 ; If Trade Receivables at the end were 3 times more than that of in the
beginning.
Answer:
Total Sales = Cost of Goods Sold + Gross Profit
= 3,50,000 + 1,50,000 = 5,00,000
Credit Sales = Total Sales − Cash Sales
= 5,00,000 − 2,00,000 = 3,00,000
|
trade receivable turnover ratio |
=Net Credit sales / Average trade
receivable |
|
3 |
=3,00,000/ Average trade
receivable |
|
Average trade receivable |
=1,00,000 |
Case 1:
Let Opening Trade Receivables = x
Closing Trade Receivables = x + 1,00,000
|
Average trade receivable |
= Opening
trade receivable +Closing trade receivable/2 |
|
1,00,000 |
=
x+x+1,00,000/2 |
|
Or,2,00,000 |
=
2x+1,00,000 |
|
Or,2x |
= 1,00,000 |
|
Or,x |
= 50,000 |
Opening Trade Receivables = x = ₹50,000
Closing Trade Receivables = x + 1,00,000 =
50,000 + 1,00,000 = ₹1,50,000
Case 2:
Let Opening Trade Receivables = x
Closing Trade Receivables = 3 x
|
Average trade receivable |
= Opening
trade receivable +Closing trade receivable/2 |
|
1,00,000 |
= x+x3/2 |
|
Or,2,00,000 |
= 4x |
|
Or,x |
= 50,000 |
Opening Trade Receivables = x = ₹50,000
Closing Trade Receivables = 3x = 3 × 50,000 =
₹1,50,000
Case 3:
Let Opening Trade Receivables = x
Closing Trade Receivables = x + 3 x =4x
|
Average trade receivable |
= Opening
trade receivable +Closing trade receivable/2 |
|
1,00,000 |
= x+4x/2 |
|
Or,2,00,000 |
= 5x |
|
Or,x |
= 40,000 |
Opening Trade Receivables = x = ₹40,000
Closing Trade Receivables = 4 x = 4 × 40,000 =
₹1,60,000
Question 110:
Calculate Trade payables Turnover Ratio from the following
information:
Opening Creditors ₹1,25,000; Opening Bills Payable ₹10,000; Closing
Creditors ₹90,000; Closing bills Payable ₹5,000; Purchases ₹9,50,000;
Cash Purchases ₹1,00,000; Purchases Return ₹45,000.
Answer:
Net Credit Purchases = Purchases –
Cash Purchases – Purchase Return
= ₹9,50,000 – ₹1,00,000 – ₹45,000 = ₹8,05,000
Average Trade Payables
|
=Opening Creditors & Bills
payables + Closing Creditors & Bills payables /
2
|
|
|
=1,25,000 + 10,000 + 90,000 +5,000/2
|
|
|
= ₹1,15,000
|
Trade Payables turnover
ratio
|
=8,05,000/115000
|
|
|
=7 Times
|
Ts Grewal Solution 2025-2026
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Class 12 / Volume – III
Chapter 4 – Accounting Ratios