Question

Calculate Trade Receivables from the following:

• Trade Receivables Turnover Ratio = 4 times
• Cash Revenue from Operations = ₹ 2,50,000
• Credit Revenue from Operations = 40% of Total Revenue
• Opening Trade Receivables = ₹ 50,000
• Closing Trade Receivables = ₹ 1,50,000

Hint:

Use the formula: Average TR = Credit Revenue ÷ TR Turnover Ratio. Always adjust for cash sales if only total revenue is given.

Answer 1

Step 1: Calculate Total Revenue from Operations Let Total Revenue = \( R \) Given, Credit Revenue = 40% of Total Revenue \[ \text{Credit Revenue} = 0.40 \times R \] Given: Cash Revenue = ₹2,50,000 So, \[ 0.40R = \text{Credit Revenue} = R - ₹2,50,000 \Rightarrow R - 0.40R = ₹2,50,000 \Rightarrow 0.60R = ₹2,50,000 \Rightarrow R = \frac{₹2,50,000}{0.60} = ₹4,16,667 \] Thus, Credit Revenue = 40% of ₹4,16,667 = ₹1,66,667
Step 2: Apply Trade Receivables Turnover Ratio \[ \text{TR Turnover Ratio} = \frac{\text{Net Credit Sales}}{\text{Average Trade Receivables}} \Rightarrow 4 = \frac{₹1,66,667}{\text{Average TR}} \Rightarrow \text{Average TR} = ₹41,667 \]
Step 3: Find Closing TR from average \[ \text{Average TR} = \frac{\text{Opening + Closing}}{2} \Rightarrow 41,667 = \frac{₹50,000 + \text{Closing}}{2} \Rightarrow ₹83,334 = ₹50,000 + \text{Closing} \Rightarrow \text{Closing TR} = ₹33,334 \]