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 = Cost + Profit = 8,00,000 + 20% of 8,00,000 = 9,60,000
Let Credit Sales = x, then Cash Sales = x/4; Total Sales = 5x/4 = 9,60,000 → x = 7,68,000
Average TR = Credit Sales / Turnover Ratio = 7,68,000 / 5 = 1,53,600
Let Opening TR = x, then Closing TR = x + 40,000
(x + x + 40,000)/2 = 1,53,600 → 2x + 40,000 = 3,07,200 → x = 1,20,000