Question

From the following information, prepare a Comparative Statement of Profit and Loss for the year ended $31^{\text {st }}$ March, 2024 :

Particulars	2023-24 (₹)	2022-23 (₹)
Revenue from operations	8,00,000	4,00,000
Cost of revenue from operations	4,00,000	2,00,000
Employee benefit expenses	1,60,000	80,000
Tax Rate	50%

(a) From the following information, calculate Opening Trade Receivables and Closing Trade Receivables :

• Trade Receivables Turnover Ratio = 4 times
• Closing Trade Receivables were ₹ 20,000 more than that in the beginning.
• Cost of Revenue from operations = ₹ 6,40,000.
• Cash Revenue from operations = $\frac{1}{3}$ of Credit Revenue from Operations
• Gross Profit Ratio = 20%

Hint:

Comparative Statements show absolute and percentage changes between two periods. - Absolute Change = Current Year Amount - Previous Year Amount. - Percentage Change = (Absolute Change / Previous Year Amount) * 100. Ensure correct calculation of Profit Before Tax and Tax Expense before finding the final Profit After Tax changes.

Answer 1

The objective is to determine the opening and closing trade receivables.

1. Calculation of Revenue from Operations (Credit Revenue):

Gross Profit Ratio = 20%
Cost of Revenue from Operations = Rs 6,40,000
Revenue from Operations is calculated as: Cost of Revenue from Operations / (1 - Gross Profit Ratio)
Revenue from Operations = Rs 6,40,000 / 0.80 = Rs 8,00,000
The relationship between Cash Revenue and Credit Revenue is: Cash Revenue = (1/3) * Credit Revenue
Total Revenue from Operations = Cash Revenue + Credit Revenue
Substituting the values: Rs 8,00,000 = (4/3) * Credit Revenue
Therefore, Credit Revenue = Rs 8,00,000 * (3/4) = Rs 6,00,000

2. Calculation of Average Trade Receivables:

The formula for Trade Receivables Turnover Ratio is: Credit Revenue / Average Trade Receivables
Given the ratio is 4: 4 = Rs 6,00,000 / Average Trade Receivables
Average Trade Receivables = Rs 6,00,000 / 4 = Rs 1,50,000

3. Defining Opening Trade Receivables as X:

Closing Trade Receivables = X + Rs 20,000
The formula for Average Trade Receivables is: (Opening Trade Receivables + Closing Trade Receivables) / 2
Substituting the known values: Rs 1,50,000 = (2X + Rs 20,000) / 2
Multiplying both sides by 2: Rs 3,00,000 = 2X + Rs 20,000
Rearranging the equation: 2X = Rs 3,00,000 - Rs 20,000 = Rs 2,80,000
Solving for X: X = Rs 2,80,000 / 2 = Rs 1,40,000

4. Final Calculation of Opening and Closing Trade Receivables:

Opening Trade Receivables = Rs 1,40,000
Closing Trade Receivables = Rs 1,40,000 + Rs 20,000 = Rs 1,60,000

Answer:

Opening Trade Receivables: Rs 1,40,000
Closing Trade Receivables: Rs 1,60,000