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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
From the following information, calculate the Opening and Closing Trade Payables: Cash Purchases 25% of Total Purchases; Revenue from Operations ₹3,00,000; Gross Profit 25% on Revenue from Operations; Opening Inventory ₹75,000; Closing Inventory ₹1,50,000; Trade Payables Turnover Ratio 3 times; Closing Trade Payables were ₹75,000 in excess of Opening Trade Payables.
Cost of Revenue from Operations = Revenue from Operations − Gross Profit
= 3,00,000 − (25% of 3,00,000) = 3,00,000 − 75,000 = ₹2,25,000
Total Purchases = Cost of Revenue from Operations + Closing Inventory − Opening Inventory
= 2,25,000 + 1,50,000 − 75,000 = ₹3,00,000
Net Credit Purchases = Total Purchases − Cash Purchases (25% of Total Purchases)
= 3,00,000 − 75,000 = ₹2,25,000
Average Trade Payables = Net Credit Purchases ÷ Trade Payables Turnover Ratio = 2,25,000 ÷ 3 = ₹75,000
Let Opening Trade Payables = x. Closing Trade Payables = x + 75,000.
Average Trade Payables = (x + x + 75,000) ÷ 2
75,000 = (2x + 75,000) ÷ 2
1,50,000 = 2x + 75,000
2x = 75,000
x = ₹37,500 (Opening Trade Payables)
Closing Trade Payables = 37,500 + 75,000 = ₹1,12,500
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.114 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
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