Question

Calculate the amount of opening trade receivables and closing trade receivables from the following figures:

Trade Receivables turnover ratio 4 times.

Cost of Revenue from operations Rs 6,40,000

Gross profit ratio 20%

Closing trade receivables were Rs 20,000 more than at the beginning.

Answer 1

Trade Receivable Turnover Ratio =$\frac{\text{Net credit rvenue from operation}}{\text{Avg trade receivables}}$

$4=\frac{8,00,000}{\text{Avg trade receivables}}$

Avg trade receivables =$\frac{8,00,000}{4}=2,00,000$

Avg trade receivables =$\frac{\text{(Opening trade receivables +Closing trade receivables)}}{2}$

$2,00,000=\frac{\text{(Opening trade receivables +Closing trade receivables)}}{2}$

Opening trade receivable +Closing trade receivable

=$2,00,000\times 2=4,00,000$

Closing trade receivables =Opening trade receivables+20,000

Therefore,

Opening trade receivable+Opening trade receivable+20,000 =4,00,000

2 Opening trade receivable =4,00,000-2,00,000

=3,80,000

Opening trade receivable =$\frac{3,80,000}{2}=1,90,000$

Closing trade receivable= 1,90,000+20,000=2,10,000

Working Note :

Revenue from operations = $6,40,000\times \frac{100}{80}=8,00,000$

Since there is no cash revenue nor even returns are given therefore, revenue from operations be taken as net credit revenue.