Question 88 Chapter 4 of +2-B - T.S. Grewal 12 Class

Question 88 Chapter 4 of +2-B

Table of Contents

The solution of Question 88 Chapter 4 of +2-B: –

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

Trade Receivables Turnover Ratio

88. A limited company made Credit Sales of Rs. 4,00,000 during the financial
period. If the collection period is 36 days and year is assumed to be 360 days, calculate:
I. Trade Receivables Turnover Ratio;
II. Average Trade Receivables;
III. Trade Receivables at the end when Trade Receivables at the end are more than that in the beginning by 6,000.

The solution of Question 88 Chapter 4 of +2-B: –

Debt Collection Period	=	360
		Trade Receivables Turnover Ratio

36	=	360
36	=	Trade Receivables Turnover Ratio
	=	360
		36
	=	10 Times

(ii)Trade Receivables Turnover Ratio	=	Net Credit Sales
		Average Trade Receivable

10	=	Rs. 4,00,000
10	=	Average Trade Receivable
	=	Rs. 4,00,000
		10
Average Trade Receivable	=	Rs. 40,000

(iii) Opening Trade Receivables	=	X
	=	x + 6,000
Average Trade Receivable	=	Opening Trade Receivable + Closing Trade Receivable
Average Trade Receivable	=	2
Rs. 40,000	=	X + (x+ Rs. 6,000)
Rs. 40,000	=	2
Rs. 80,0000	=	2x + Rs. 6,000
2x	=	Rs. 80,000 – Rs. 6,000
2x	=	Rs. 74,000
X	=	Rs. 74,000
		2
X	=	Rs. 37,000
Opening Trade Receivables	=	Rs. 37,000
Closing Trade Receivables	=	Rs. 37,000 + 6,000
	=	Rs. 43,000