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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
From the following information, calculate the Opening and Closing Trade Receivables, if the Trade Receivables Turnover Ratio is 3 times:
(i) Cash Revenue from Operations is 1/3rd of Credit Revenue from Operations.
(ii) Cost of Revenue from Operations is ₹3,00,000.
(iii) Gross Profit is 25% of Revenue from Operations.
(iv) Trade Receivables at the end are 3 times more than that at the beginning.
Since Gross Profit is 25% of Revenue (a margin), let Revenue from Operations = R: Cost of Revenue = R − 0.25R = 0.75R.
3,00,000 = 0.75R
R = ₹4,00,000 (Total Revenue from Operations)
Let Credit Revenue from Operations = y. Cash Revenue = (1/3)y.
Total Revenue = y + (1/3)y = (4/3)y
4,00,000 = (4/3)y
y = ₹3,00,000 (Credit Revenue from Operations)
Average Trade Receivables = Credit Revenue ÷ Trade Receivables Turnover Ratio = 3,00,000 ÷ 3 = ₹1,00,000
Let Opening Trade Receivables = x. Since Closing is 3 times MORE than Opening: Closing Trade Receivables = x + 3x = 4x.
Average Trade Receivables = (x + 4x) ÷ 2
1,00,000 = 5x ÷ 2
5x = 2,00,000
x = ₹40,000 (Opening Trade Receivables)
Closing Trade Receivables = 4 × 40,000 = ₹1,60,000
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Vol 3 Chapter 4 Q.108 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
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