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 (Cost of Goods Sold) Rs. 6,40,000

Gross Profit Ratio 20%

Closing Trade Receivables were Rs. 20,000 more than at the beginning.

Cash Revenue from Operations being 33 $\frac{1}{3}$% of Credit Revenue from Operations.

Answer 1

Gross Profit
= 20% of Revenue from Operations

It means if Revenue from Operations (Sales) = Rs. 100

Gross Profit = Rs. 20

& Cost of Revenue from Operations = Rs. 80

If Cost of Revenue from Operations is Rs. 80,
Revenue from Operations is Rs. 100

If Cost of Revenue from Operations is Rs. 6,40,000
Revenue from Operations is $\frac{100}{80}\times Rs.6,40,000$ = Rs. 8,00,000

Total Revenue from Operations = Rs. 8,00,000

As Cash Revenue from Operations being 33 $\frac{1}{3}$% of Credit Revenue from Operations,

The Ratio of Cash Revenue from Operations and Credit

Revenue from Operations = 33$\frac{1}{3}$ % : 100 or 1 : 3 or $\frac{1}{4}:\frac{3}{4}$

Credit Revenue from Operations = Rs. 8,00,000 $\times \frac{3}{4}=Rs.6,00,000$

Trade Receivable Turnover Ratio $=\frac{\text{Credit Revenue from Operations}}{\text{Average Trade Receivables}}$

4 (Given) = $\frac{Rs.6,00,000}{\text{Average Trade Receivables}}$

Average Trade Receivables = $\frac{Rs.6,00,000}{4}=Rs.1,50,000$

Opening Trade Receivables
= Rs. 1,50,000 - $\frac{1}{2}$ of Rs. 20,000
= Rs. 1,40,000

Closing Trade Receivables
= Rs. 1,50,000 + $\frac{1}{2}$ of Rs. 20,000
= Rs. 1,60,000