question_answer

Calculate the amount of opening trade receivables and closing trade receivables from the following figures: Trade Receivables Turnover Ratio = 5 times Gross Profit Ratio = 20% Opening Trade Receivables were \[\frac{1}{3}rd\] of Closing Trade Receivables. Cash Revenue from Operations being \[\frac{1}{4}\,th\] of Credit Revenue from Operations, Cost of Revenue from Operations is Rs. 10,00,000.

Answer:

Revenue from Operations \[\text{=}\,\,\text{Cost}\,\,\text{of}\,\,\text{Revenue}\,\,\text{from}\,\,\text{Operations}\,\times \,\frac{100}{100-\text{Gross}\,\text{Profit}\,\text{Ratio}}\]                                                 \[=\,10,00,000\,\times \,\frac{100}{100-20}\,=\,Rs.\,12,50,000\]             Let Credit Revenue from Operations be Rs. x.             \[\therefore \,\,\text{Cash}\,\text{Revenue}\,\text{From}\,\text{Operations}\,\text{is}\,\,Rs.\,\frac{x}{4}\].             Total Revenue from Operations \[=\,x\,+\,\frac{x}{4}\]             \[i.e.\,\,x\,+\,\frac{x}{4}\,=\,12,50,000\,\Rightarrow \,\frac{5x}{4}\,=\,12,50,000\,\Rightarrow \,x\,=\,Rs.\,10,00,000\]             Trade Receivable Turnover Ratio \[=\frac{\text{Credit}\,\text{Revenue}\,\text{from}\,\text{Operations}}{\text{Average}\,\text{Trade}\,\text{Receivables}}\]                                                             \[5\,=\,\frac{\text{Rs}\text{.}\,\text{10,00,000}}{\text{Average}\,\text{Trade}\,\text{Receivables}}\]             \[\therefore \] Average Trade Receivable = Rs. 2,00,000             Let Closing Trade Receivables = Rs. y             \[\therefore \] Opening Trade Receivables\[=\,Rs.\,\frac{y}{3}\]             Average Trade Receivables \[=\,\frac{1}{2}\,\left( y\,+\,\frac{y}{3} \right)\]             \[i.e.\,\frac{4y}{3}\,\times \,\frac{1}{2}\,=\,2,00,000\]             y \[=\,2,00,000\,\times \frac{6}{4}\,=\,Rs.\,3,00,000\]             So, Opening Trade Receivables = Rs. 1,00,000             And Closing Trade Receivables = Rs. 3,00,000