Question 92 Chapter 4 of +2-B - T.S. Grewal 12 Class

Question 92 Chapter 4 of +2-B

Table of Contents

The solution of Question 92 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

92. From the information given below, calculate Trade Receivables Turnover Ratio:
Credit Revenue from Operations, i.e., Credit Sales Rs. 8,00,000; Opening Trade Receivables Rs. 1,20,000; and Closing Trade Receivables Rs. 2,00,000.
State giving reason, which of the following would increase, decrease or not change Trade Receivables Turnover Ratio:
(i) Collection from Trade Receivables Rs. 40,000.
(ii) Credit Revenue from Operations, i.e., Credit Sales Rs. 80,000.
(iii) Sales Return Rs. 20,000.
(iv) Credit Purchase Rs. 1,60,000.

The solution of Question 92 Chapter 4 of +2-B: –

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Average Trade Receivable	=	Opening Trade Receivable + Closing Trade Receivable
		2

	=	Rs. 1,20,000 + Rs. 2,00,000
	=	2
	=	Rs. 1,60,000
Trade Receivables Turnover Ratio	=	Net Credit Sales
		Average Trade Receivable
	=	Rs. 8,00,000
	=	Rs. 1,60,000
	=	5 Times

Transactions	Impact on Trade Receivables Turnover Ratio	Reason
Collection from Trade Receivables Rs. 40,000.	Increase	The amount of Closing Trade Receivable is decrease and no change in Net credit Sales.

(ii) Credit Revenue from Operations, i.e., Credit Sales Rs. 80,000.	Decrease	There will be an increase in both Net credit sales and average trade receivables with closing trade receivables.

(iii) Sales Return Rs. 20,000.	Increase	There will be a decrease in both Net credit sales and average trade receivables.

(iv) Credit Purchase Rs. 1,60,000.	No Change	The amounts of both net credit sales and average trade sales.