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.

4 Times

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2 times

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6.03 times

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None of these

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Solution

The correct option is C
6.03 times

Net Credit purchases = Rs 1,23,555 - Rs 10,000
= Rs 1,13,555

Average trade payables $= \frac{25, 121 + 12, 555}{2} = 18, 838$

$I n v e n t o r y t u r n o v e r r a t i o = \frac{1, 13, 555}{18, 838} = 6.03$

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$\begin{matrix} Rs. Credit Purchases during the year & 6, 20, 000 Purchase Returns (Out of credit purchase) & 20, 000 Opening Creditors & 1, 00, 000 Closing Creditors & 1,40,000 Opening Bills Payable & 25,000 Closing Bills Payable & 35,000 \end{matrix}$

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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.

The correct option is C 6.03 times Net Credit purchases = Rs 1,23,555 - Rs 10,000 = Rs 1,13,555 Average trade payables =25,121+12,5552=18,838 Inventory turnover ratio=1,13,55518,838=6.03

The correct option is C
6.03 times

Net Credit purchases = Rs 1,23,555 - Rs 10,000
= Rs 1,13,555

Average trade payables $= \frac{25, 121 + 12, 555}{2} = 18, 838$

$I n v e n t o r y t u r n o v e r r a t i o = \frac{1, 13, 555}{18, 838} = 6.03$