12th | Accounting Ratios | Question No. 96 To 100 | Ts Grewal Solution 2022-2023

Calculate Trade Payables Turnover Ratio and Average Debt payment Period from the following information:
 

	1st April, 2020  `	31st March, 2021  `
Sundry Creditors	1,50,000	4,50,000
Bills Payable	50,000	1,50,000

Total Purchases  ` 21,00,000; Purchases Return  ` 1,00,000; Cash Purchases  ` 4,00,000.

Average Trade Payables	=  Opening Creditors & B/P + Closing Creditors & B/P÷2
	=  1,50,000 + 50,000 + 4,50,000 + 1,50,000÷2
	=   ` 4,00,000
Net Credit Purchases	=  Total Purchases - Purchases Return - Cash Purchases
	=  21,00,000 - 1,00,000 - 4,00,000 =  ` 16,00,000
Trade Payables Turnover Ratio	=  Net Credit Purchases /  Average Trade Payables  =  16,00,000/4,00,000 = 4 times
Average Debt Payment Period	=  12 Trade Payable Turnover Ratio
	=  12/4  =  3 months

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.

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

Calculate Trade Payables Turnover Ratio for the year 2020-21 in each of the alternative cases:
Case 1 : Closing Trade Payables  ` 45,000; Net Purchases  ` 3,60,000; Purchases Return  ` 60,000; Cash Purchases  ` 90,000.
Case 2 : Opening Trade Payables  ` 15,000; Closing Trade Payables  ` 45,000; Net Purchases  ` 3,60,000. 
Case 3 : Closing Trade Payables  ` 45,000; Net Purchases  ` 3,60,000.
Case 4 : Closing Trade Payables (including  ` 25,000 due to a supplier of machinery)  ` 55,000; Net Credit Purchases  ` 3,60,000.

Case 1

Net Credit Purchases = Net Purchases − Cash Purchases

= 3,60,000 − 90,000

= 2,70,000

Trade Payables Turnover Ratio = Net Credit Purchases/Closing Trade Payables                                     

= 2,70,000/45,000 

= 6 times

Case 2

Net Purchases = 3,60,000
Average Trade Payables = Opening Trade Payables + Closing Trade Payables/2                                                     

= 15,000 + 45,000/2 = 30,000

Trade Payables Turnover Ratio = Net Credit Purchases/Average Trade Payables  

= 3,60,000/30,000 = 12 times

Case 3

Trade Payable Turnover Ratio = Net Credit Purchases/Closing Trade Payables 

= 3,60,000/45,000 

= 8 times

Case 4

Net Credit Payables for Goods = Trade Payables − Creditors for Machinery

= 55,000 − 25,000

= 30,000

Trade Payables Turnover Ratio = Net Credit Purchases/Average Trade Payables 

= 3,60,000/30,000 

= 12 times

 

Closing Trade Payables `5,40,000, Net purchases `43,20,000, Cash purchases `10,80,000. Calculate Trade Payables Turnover Ratio 

Trade payable turnover ratio= credit purchases/ average trade payable

Trade payable turnover ratio =32,40,000 / 5,40,000= 6 Times

Credit purchases= net purchases - cash purchases

32,40,000 = 43,20,000- 10,80,000     

From the following information, calculate Opening and Closing trade payable:
Cash purchases 25% of total Purchases, Revenue from operation `3,00,000, Gross profit 25% on revenue from Operations, Opening Inventory ` 75,00,000, Closing Inventory  `150,000, Trade Payables turnover Ratio 3 times, Closing Trade Payables were `75,000 in excess of opening trade payables

1	Cost of revenue from operation	= revenue from operation - gross profit
		=3,00,000 -( 25% of revenue from operations) = 3,00,000 -( 25% of 3,00,000) = 3,00,000 - 75,000
	Cost of revenue from operation	=2,25,000
2.	Total purchases   Total purchases	= cost of revenue + closing inventory - opening inventory = 25,000 + 15,0000 - 75,000 = 3,00,000
3.	Net credit purchases	= total purchases - Cash purchases = 3,00,000 - 25% of 3,00,000     3,00,000 - 75,000
	Net credit purchases	= 2,25,000
4.	Trade payable turnover ratio 3 3x + 3 X + 2,25,000 6x + 2,25,000 6x = X = X= Closing trade payables =	= net credit purchases / average trade payable = 225,000/ X + X + 7500/2 = 4,50,000 = 4,50,000 4,50,000 -2,25,000 2,25,000/6 37,500 (Opening trade payable) 37,500 + 75,000= 1,12,500