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Question

Calculate Trade Payables Turnover Ratio for the year 2018-19 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.

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Solution

Case 1

Net Credit Purchases = Net Purchases − Cash Purchases

= 3,60,000 − 90,000 = 2,70,000
Trade Payables Turnover Ratio = Net Credit PurchasesClosing Trade Payables = 2,70,00045,000 = 6 times

Case 2

Net Purchases = 3,60,000
Average Trade Payables = Opening Trade Payables + Closing Trade Payables2 = 15,000 + 45,0002 = 30,000
Trade Payables Turnover Ratio = Net Credit PurchasesAverage Trade Payables = 3,60,00030,000 = 12 times

Case 3

Trade Payable Turnover Ratio = Net Credit PurchasesClosing Trade Payables = 3,60,00045,000 = 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 PurchasesAverage Trade Payables = 3,60,00030,000 = 12 times


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