Question

From the following information, calculate Opening and Closing Trade Receivables, if Trade Receivables Turnover Ratio is 3 Times:
(i) Cash Revenue from Operations is 1/3rd of Credit Revenue from Operations.
(ii) Cost of Revenue from Operations is ₹3,00,000.
(iii) Gross Profit is 25% of the Revenue from Operations.
(iv) Trade Receivables at the end are 3 Times more than that of in the beginning.

Answer 1

$\begin{array}{l}\text{Trade Receivable Turnover Ratio =}\frac{\text{Credit Revenue from Operations}}{\text{Average Trade Receivables}}\\ \text{3 =}\frac{3,00,000}{\text{Average Trade Receivables}}\\ \text{Average Trade Receivables =}\frac{3,00,000}{3}=\text{Rs 1,00,000}\\ \text{Average Trade Receivables}=\frac{\text{Opening Trade Receivables}+\text{Closing Trade Receivables}}{2}\\ \text{1,00,000 =}\frac{x+4x}{2}\\ \text{So, x would be Rs 40,000}\\ \therefore \text{Opening receivables would be Rs 40,000 and,}\\ \text{Closing Receivables would be Rs 1,60,000}(40,000\times 4)\\ \text{Revenue from Operations}=\text{3,00,000+}\frac{25}{75}\times 3,00,000=\text{Rs 4,00,000}\\ \text{Credit Revenue from Operations}=\text{Total Revenue from Operations}-\text{Cash Revenue from Operations}\\ \text{x}=\text{4,00,000-}\frac{1}{3}x\\ \text{Credit Revenue from Operations}=\text{Rs 3,00,000}\end{array}$