Trade Payables Turnover Ratio

Q.

Explain the Process of Credit Creation by Commercial Banks.

Q.

Give the major heading and sub-heading of the following items which is to be presented in the Balance Sheet of a company.

(i) Sundry Creditors

(ii) Calls-in-Advance

(iii) Copyrights

(iv) Investment (Trade)

Q. Net Credit Purchases = ____________ - Cash Purchases - Purchases Returns

1. Trade Payables
2. Total Purchases
3. Bills Payables
   
4. None of the above

Q.

Quick ratio of a company is 1 : 1. State giving reasons (for any four), which of the following would improve, reduce or not change the ratio ?

(i) Purchase of machinery for cash.
(ii) Purchase of goods on credit.
(iii) Sale of furniture at cost.
(iv) Sale of goods at a profit.
(v) Redemtption of debentures at a premium.

Q.

The ___________ may indicate that the firm is experiencing stock-outs and lost sales.

1. inventory turnover ratio

2. average collection period

3. average payment period

4. quick ratio

Q.

Total Purchases - Cash Purchases - Purchase Returns =

1. Net credit purchases

2. Average collection period

3. Average payment period

4. None of these

Q. The following are the Balance Sheets of Mohan Limited, at the end of 2011 and 2012.
$Rs000\begin{array}{cccccc}\text{Liabilities}& \text{2011}& \text{2012}& \text{Assets}& \text{2011}& \text{2011}\\ \text{Equity Share Capital}& 400& 600& \text{Land and Buildings}& 270& 170\\ \text{Reserves and Surplus}& 312& 354& \text{Plant and Machinery}& 310& 786\\ \text{Debentures}& 50& 100& \text{Furniture and}& 9& 18\\ & & & \text{Fixtures}& & \\ \text{Long Term Loans}& 150& 255& \text{Other Fixed Assets}& 20& 30\\ \text{Accounts Payable}& 255& 117& \text{Loans and Advances}& 46& 59\\ \text{Other Current}& 7& 10& \text{Cash and Bank}& 118& 10\\ \text{Liablilities}& & & & & \\ & & & \text{Account Receivable}& 209& 190\\ & & & \text{Inventory}& 160& 130\\ & & & \text{Prepaid Expenses}& 3& 3\\ & & & \text{Other Current Assets}& 29& 40\\ & \underset{–}{\underset{–}{1,174}}& \underset{–}{\underset{–}{1,436}}& & \underset{–}{1,174}& \underset{–}{1,436}\end{array}$
Prepare a Comparative Balance Sheet and study the financial position of the company.

Q. Average trade payables is the of the opening and closing trade payables.

1. median
2. arithmetic mean
3. mode
4. range

Q.

Which of the following transactions and events results in an increase in liabilities and a decrease in net income?

1. The accrual of wages expense at year-end.

2. Collecting cash from a customer for services to be provided in the future.

3. The accrual of revenue earned at year-end.

4. Adjustment of the unearned revenue accounts for revenue earned during the period.

Q.

The accounts payable turnover ratio, also known as ___ turnover ratio.

1. Creditor`s velocity

2. Creditor`s turnover ratio

3. Both:

   Creditor`s turnover ratio

   Creditor`s velocity

4. None of these

Q.

Mr. Bisla has a Recurring Deposit Account for $2$ yr at $6\%$ interest per annum. He receives $₹975$ as interest on maturity. Find

1. the monthly instalment amount.
2. the maturity amount.

Q. Trade payables turnover ratio is the ratio of net credit purchases to the average .

1. trade payables
2. total turnover
3. purchases
4. profits

Q. What relationships will be established to study?
(a) Inventory Turnover
(b) Debtor Turnover
(c) Payables Turnover
(d) Working Capital Turnover

Q.

Company A reported annual purchases on credit of Rs 1, 23, 555 and returns of Rs10, 000 during the year ended December 31, 2017. Trade payables at the beginning and end of the year were Rs 12, 555 and Rs 25, 121, respectively. Calculate trade payables turnover ratio.

1. 2 times

2. 4 Times

3. 6.03 times

4. None of these

Q.

Trade payables turnover ratio = ___

1. None of these

2. $\frac{\text{Net Credit Purchase}}{\text{Average accounts payable}}$

3. $\frac{\text{Net Credit Purchase}}{\text{Average accounts receivable}}$

4. $\frac{\text{Net credit Revenue from Operations}}{\text{Average Trade payable}}$

Q. Objective type questions :-
Answer in one sentence only.

How is closing stock valued?

Q.

Which of these values of trade payables turnover ratio is more favorable?

1. Higher

2. Lower

3. Equal to 1

4. None of these

Q.

The trade payables turnover ratio is a measure of ___

1. Long term solvency

2. Long term liquidity

3. Short term liquidity

4. None of these

Q. A/an for the trade payables turnover ratio means that credit payments are made promptly.

1. average value
2. low value
3. high value
4. zero value

Q.

Trade payables turnover ratio is expressed in terms of ___

1. Percentage

2. Times

3. Days

4. None of these

Q. Material Usage Variance $=$ ____________.

1. Standard Quantity
2. Actual Quantity
3. Standard Usage $-$ Actual Usage
4. (Standard Price - Actual Usage) ×× Standard Price
   

Q. Calculate the creditor's turnover ratio from the following data:
Credit purchase during the year = $Rs.12,00,000$
(Creditor + bills payables) in the beginning of year = $Rs.4,00,000$
(Creditor + bills parables) at the end of year = $Rs.2,00,000$

1. 6 times
2. 2 times
3. 5 times
4. 4 times

Q. Goods sold on credit when returned by the customers due to certain reasons are only recorded in the Return outward Book.

1. True
2. False

Q. Material Usage Variance $=$ Material Mix Variance $+$ ___________.

1. Material Yield Variance
2. Material Cost Variance
3. Material Quantity Variance
4. Material Price Variance

Q. Rs $3,50,000$ cash paid to creditors for settlements of credit purchases will be recorded in _______________.

1. Sales Book
2. Purchase Book
3. Cash Book
4. Journal Proper (General Journal)

Q. Credit side of the trial balance was Rs$11,200$ lower than the debit side. The difference was placed in suspense. The correction of which of the following errors will reduce the suspense account balance?

1. Stationery acquired on credit terms for $Rs340$ has been recorded in the purchases journal.
2. A cash sale of Rs$3,400$ has been posted as Rs$4,300$
3. A credit Note for Rs$900$ from a supplier has not been entered in return outwards day book.
4. A credit purchase of Rs$2,150$ has not been posted to the customer.

Q. Total of the debit side of cash book is ___ than the credit side.

1. More
2. Equal to
3. Less
4. None of these

Q. Purchased goods for $Rs.90,000$ from Mr. Nikhil on credit will be recorded in ______________.

1. sales book
2. purchase book
3. journal proper (general journal)
4. cash book

Q. To test the liquidity of a concern, which of the following ratios are useful?
I. Acid test ratio
II. Capital turnover ratio
III. Bad debts to sales ratio
IV. Inventory turnover ratio
Select the correct answer using the codes given.

1. I and III
2. I and IV
3. II and IV
4. II and III

Q. Return of goods purchased on credit to the suppliers are only recorded in the Return inward Book.

1. True
2. False