Question

Credit purchases are Rs. 5,50,000 and purchases return are Rs. 50,000. What will be the value of Average Trade Payables if Trade Payables Turnover Ratio is 5?

• A. Rs. 90,000
• B. Rs. 10,000
• C. Rs. 1,00,000
• D. None of the above

Answer 1

The correct option is C Rs. 1,00,000

Net Credit Purchases
= Credit Purchases - Purchases Return
= Rs. 5,50,000 - Rs. 50,000
= Rs. 5,00,000

Average Trade Payables
= Net Credit Purchases / Trade Payables Turnover Ratio
= Rs. 5,00,000 / 5
= Rs. 1,00,000