Question

Calculate Opening and Closing Trade Receivables:
Trade Receivables Turnover Ratio = 5 times
Cost of Revenue = \₹ 8,00,000
Gross Profit Ratio = 20%
Closing TR = 40,000 more than Opening
Cash Sales = \( \frac{1}{4} \) of Credit Sales

Hint:

Use Total Sales = Cost + Profit and relate Credit and Cash Sales to derive receivables correctly.

Answer 1

Sales calculated as Cost + Profit, where Profit is 20% of Cost. Total Sales = 8,00,000 + (0.20 * 8,00,000) = 9,60,000.
Assuming Credit Sales are 'x' and Cash Sales are x/4, Total Sales = x + x/4 = 5x/4. Therefore, 5x/4 = 9,60,000, which results in x = 7,68,000 for Credit Sales.
Average Trade Receivables (TR) = Credit Sales / Turnover Ratio = 7,68,000 / 5 = 1,53,600.
Let Opening TR be 'x'. Then Closing TR = x + 40,000.
The average of Opening and Closing TR is calculated as (x + x + 40,000)/2 = 1,53,600. This simplifies to 2x + 40,000 = 3,07,200, leading to x = 1,20,000 for Opening TR.