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Question 51 Chapter 4 of +2-B
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Trade Payable Turnover Ratio
51. (Net Purchases/Accounts Payable T/O Ratio/Average age of Creditors) You are given the following data.
(a) Gross profit at 30% on sales (Revenue from Operation) = ₹ 60,000
(b) Inventory turnover = 7 times
(c) The opening inventory is ₹ 5,000 less than the closing inventory.
(d) Trade payable (opening) Z ₹ 30,000 ; Trade payable (closing) Z ₹ 38,000.
Find out (a) Net purchases (b) Trade payable turnover (c) Average age of trade payables.
The solution of Question 51 Chapter 4 of +2-B: –
Gross profit ratio | = | 30% |
If Sales | = | ₹ 100 |
Gross profit | = | ₹ 30 |
Cost of goods sold | = | ₹ 100 – ₹ 30 |
= | ₹ 70 | |
Cost of goods sold | = | ₹ 60,000 |
Cost of goods sold | = | 70 | X | ₹ 60,000 |
30 | ||||
= | ₹ 1,40,000 |
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Inventory Turnover Ratio | = | Cost of goods sold |
Average inventory | ||
7 | = | 1,40,000 |
Average inventory | ||
Average Inventory | = | 1,40,000 |
7 | ||
Average Inventory | = | ₹ 20,000 |
Average Inventory | = | Opening Inventory + Closing Inventory |
2 | ||
Let assume Opening Inventory | = | X |
Closing Inventory | = | x + ₹ 5,000 |
Average Inventory | = | x + ( x + ₹ 5,000) |
2 | ||
₹ 20,000 | = | x + ( x + ₹ 5,000) |
2 | ||
₹ 20,000 x 2 | = | 2x + ₹ 5,000 |
₹ 40,000 | = | 2x + ₹ 5,000 |
₹ 40,000 – ₹ 5,000 | = | 2x |
x | = | ₹ 35,000 |
2 | ||
Opening Inventory | = | ₹ 17,500 |
Closing Inventory | = | Opening Inventory + ₹ 5,000 |
= | ₹ 17,500+ ₹ 5,000 | |
= | ₹ 22,500 |
(a) Computation of net purchases
Cost of goods sold | = | Opening Inventory + Purchases – Closing Inventory |
₹ 1,40,000 | = | ₹ 17,500+ Purchases – ₹ 22,500 |
Purchases | = | ₹ 1,40,000 – ₹ 5,000 |
= | ₹ 1,45,000 |
(b) Accounts Payable Turnover Ratio
= | Net Purchases (Credit) | |
Average Accounts Payable |
Average accounts payable | = | Opening accounts payable + Closing accounts payable |
2 | ||
= | ₹ 30,000 + ₹ 38,000 | |
2 | ||
= | ₹ 34,000 |
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Accounts Payable Turnover Ratio | = | ₹ 1,45,000 |
₹ 34,000 | ||
= | 4.26 times | |
Average age of Creditors | = | Number of days in a year |
Accounts Payable Turnover Ratio |
= | 356 | |
4.26 | ||
Average trade receivable | = | 85.6 Days |
Also, Check out the solved question of previous Chapters: –
Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
- Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
- Chapter No. 8 – Company Accounts (Share Capital)
- Chapter No. 9 – Company Accounts (Issue of Debentures)
- Chapter No. 10 – Company Accounts (Redemption of Debentures)
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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