text: # 12th | Volume 3 | Chapter:4 | Question No. 91 to 95 | Accounting Ratio | Ts grewal Accounts Solution 2022-2023
  
  #### Question 91:
  
  Calculate Trade Receivables Turnover Ratio in each of the following alternative cases:
  Case 1: Net Credit Sales
  `4,00,000; Average Trade Receivables  `1,00,000.
  Case 2: Revenue from Operations (Net Sales)
  `30,00,000; Cash Revenue from Operations, i.e., Cash Sales  `6,00,000; Opening Trade Receivables  `2,00,000; Closing Trade Receivables  `6,00,000.
  Case 3: Cost of Revenue from Operations or Cost of Goods Sold  `3,00,000; Gross Profit on Cost 25%; Cash Sales 20% of Total Sales; Opening Trade Receivables
  `50,000; Closing Trade Receivables  `1,00,000.
  Case 4: Cost of Revenue from Operations or Cost of Goods Sold
  `4,50,000; Gross Profit on Sales 20%; Cash Sales 25% of Net Credit Sales, Opening Trade Receivables  `90,000; Closing Trade Receivables  `60,000.
  
  #### Answer:
  
  Case 1
  
  Trade receivable turnover ratio = Net sales/ Debtors+Bills receivable
  
  Trade receivable turnover ratio = 4,00,000/1,00,000 = 4 Times
  
  Case 2
  
  Net Credit Sales = Total Sales −Cash Sales = 30,00,000 - 6,00,000 = 24,00,000
  Average Trade receivables= Opening Trade  Receivables + Closing Trade Receivables/2
  
  Average Trade receivables=2,00,000+600,000/2 = 4,00,000
  
  Trade receivable turnover ratio = Net sales/ Average Trade receivables
  
  Trade receivable turnover ratio = 24,00,000/4,00,000 = 6 Times
  
  Case 3
  
  Cost of Goods Sold = 3,00,000
  
  Gross Profit = 25% on Cost
  
  Gross Profit = 25/100×3,00,000=75,000
  
  Total Sales = Cost of Goods Sold + Gross Profit
  
  = 3,00,000 + 75,000 = 3,75,000
  
  Cash Sales = 20% of Total Sales
  
  Cash sales =3,75,000×20/100=75,000
  
  Credit Sales = Total Sales − Cash Sales
  
  = 3,75,000 − 75,000 = 3,00,000
  
  Average trade receivable= Opening Trade receivables+Closing Trade receivables/2
  
  Average trade receivable= 50,000+1,00,000/2=75,000
  
  Trade receivable turnover ratio= Net sales/ Average receivables
  
  Trade receivable turnover ratio= 3,00,000/75,000= 4 Times
  
  Case 4
  
  Let Sales be = x
  
  Gross profit=x×20/100=20x/100
  
  Sales = Cost of goods sold+Gross profit
  
  Or. X =4,50,000+20x/100
  
  Or, x-20/100=4,50,000
  
  Or, x=4,50,000×100/80=5,62,500
  
  Sales = x = 5,62,500
  
  Let Credit Sales be = a
  
  Cash Sales = a×25/100=25a/100
  
  Sales =Cash Sales +Credit Sales
  
  Or, 5,62,500=25a/100+a
  
  Or, 5,62,500=125a/100
  
  Or, a=5,62,500×100/125=4,50,000
  
  Credit Sales= a = 4,50,000
  Average Trade receivables= Opening Trade Receivables +Closing Trade Receivables/2
  
  Average Trade receivables= 90,000+60,000/2=75,000
  
  Trade receivable turnover ratio= Net sales/ Average receivables
  
  Trade receivable turnover ratio= 4,75,000/75,000= 6 Times
  
  #### Question 92:
  
  From the information given below, calculate Trade Receivables Turnover Ratio:
  Credit Revenue from Operations, i.e., Credit Sales
  `8,00,000; Opening Trade Receivables  `1,20,000; and Closing Trade Receivables  `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
  `40,000.
  (ii) Credit Revenue from Operations, i.e., Credit Sales  `80,000.
  (iii) Sales Return  `20,000.
  (iv) Credit Purchase  `1,60,000.
  
  #### Answer:
  
  Average Trade receivables= Opening Trade Receivables +Closing Trade Receivables/2
  
  Average Trade receivables= 1,20,000+2,00,000/2=1,60,000
  
  Trade receivable turnover ratio= Net sales/ Average receivables
  
  Trade receivable turnover ratio= 8,00,000/1,60,000= 5 Times
  
  (i) Collection from Trade Receivables ` 40,000- Increase
  
  Reason: Collection from Trade Receivables will result in decrease in the amount of closing Trade Receivables which will reduce the amount of average Trade Receivables.
  
  Closing Trade Receivables = 2,00,000 − 40,000 =  ` 1,60,000
  
  Average Trade receivables= Opening Trade Receivables +Closing Trade Receivables/2
  
  Average Trade receivables= 1,20,000+1,60,000/2=1,40,000
  
  Trade receivable turnover ratio= Net sales/ Average receivables
  
  Trade receivable turnover ratio= 8,00,000/1,40,000= 5.71 Times (Increased from 5 to 5.71 times)
  
  (ii) Credit Revenue from Operations, i.e. Sales  ` 80,000- Decrease
  
  Reason: This transaction will result in increase in both credit sales as well as closing Trade Receivables. Increase in closing Trade Receivables, in turn, will lead to an increase in the average Trade Receivables.
  
  Credit Sales = 8,00,000 + 80,000 =  ` 8,80,000
  
  Closing Trade Receivables = 2,00,000 + 80,000 =  ` 2,80,000
  
  Average Trade receivables= Opening Trade Receivables +Closing Trade Receivables/2
  
  Average Trade receivables= 1,20,000+2,80,000/2=2,00,000
  
  Trade receivable turnover ratio= Net sales/ Average receivables
  
  Trade receivable turnover ratio= 8,80,000/2,00,000= 4.4 Times
  
  (iii) Sales Return  ` 20,000- Increase
  
  Reason: This transaction will result in decrease in both sales and average Trade Receivables.
  
  Credit Sales = 8,00,000 − 20,000=  ` 7,80,000
  
  Closing Trade Receivables = 2,00,000 − 20,000 =  ` 1,80,000
  
  Average Trade receivables= Opening Trade Receivables +Closing Trade Receivables/2
  
  Average Trade receivables= 1,20,000+1,80,000/2=1,50,000
  
  Trade receivable turnover ratio= Net sales/ Average receivables
  
  Trade receivable turnover ratio= 1,80,000/1,50,000= 5.2 Times
  
  (iv) Credit Purchase  ` 1,60,000- No Change
  
  Reason: Credit Purchase does not affect the Debtors Turnover Ratio
  
  #### Question 93:
  
  ` 1,75,000 is the Credit Revenue from Operations, i.e., Net Credit Sales of an enterprise. If Trade Receivables Turnover Ratio is 8 times, calculate Trade Receivables in the Beginning and at the end of the year. Trade Receivables at the end is  ` 7,000 more than that in the beginning.
  
  #### Answer:
  
  Trade receivable turnover ratio= Net sales/ Average receivables
  
  8=1, 75,000/ Average receivables
  
  Average receivables= 27,875
  
  Let Opening Trade Receivables = x
  
  Closing Trade Receivables = x + 7,000
  
  Average receivables= Opening Receivables +Closing Receivables/2
  
  21,875=x+x+7000/2
  
  Or, 43,750=2x+7,000
  
  Or, 2x=36,750
  
  Or, x=18,375
  
  Opening Trade Receivables = x = 18,375
  
  Closing Trade Receivables = x +7,000 = 25,375
  
  #### Question 94:
  
  From the following information, calculate Opening and Closing Trade Receivables, if 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 the Revenue from Operations.
  (iv) Trade Receivables at the end are 3 Times more than that of in the beginning.
  
  #### Answer:
  
  Trade Receivable Turnover Ratio
  
  =Credit Revenue from Operations/Average Trade Receivables
  
  =3,00,000 /Average Trade Receivables
  
  Average Trade Receivables
  
  = 3,00,000/3= ` 1,00,000
  
  Average Trade Receivables
  
  =Opening Trade Receivables + Closing  Trade Receivables/2
  
  1,00,000
  
  =x+4x/2
  
  #### ∴Opening receivables would be  ` 40,000 and, Closing Receivables would be  `1,60,000(40,000×4)
  
  Revenue from Operations
  
  =3,00,000+25/75×3,00,000= ` 4,00,000
  
  Credit Revenue from Operations
  
  =Total Revenue from Operations − Cash Revenue from Operations
  
  x
  
  =4,00,000-1/3x
  
  Credit Revenue from Operations
  
  = ` 3,00,000
  
  #### Question 95:
  
  Cash Revenue from Operations (Cash Sales)  ` 2,00,000, Cost of Revenue from Operations or Cost of Goods Sold  ` 3,50,000; Gross Profit  ` 1,50,000; Trade Receivables Turnover Ratio 3 Times. Calculate Opening and Closing Trade Receivables in each of the following alternative cases;
  
  Case 1 : If Closing Trade Receivables were
  ` 1,00,000 in excess of Opening Trade Receivables.
  Case 2 : If trade Receivables at the end were 3 times than in the beginning.
  Case 3 ; If Trade Receivables at the end were 3 times more than that of in the beginning.
  
  #### Answer:
  
  Total Sales = Cost of Goods Sold + Gross Profit
  
  = 3,50,000 + 1,50,000 = 5,00,000
  
  Credit Sales = Total Sales − Cash Sales
  
  = 5,00,000 − 2,00,000 = 3,00,000
  
   trade receivable turnover ratio =  Net Credit sales / Average trade receivable 3 =  3,00,000/ Average trade receivable Average trade receivable =  1,00,000
  
  Case 1:
  
  Let Opening Trade Receivables = x
  
  Closing Trade Receivables = x + 1,00,000
  
   Average trade receivable = Opening trade receivable +Closing trade receivable/2 1,00,000 = x+x+1,00,000/2 Or,            2,00,000 = 2x+1,00,000 Or,                      2x = 1,00,000 Or,                        x = 50,000
  
  Opening Trade Receivables = x = ` 50,000
  
  Closing Trade Receivables = x + 1,00,000 = 50,000 + 1,00,000 =  ` 1,50,000
  
  Case 2:
  
  Let Opening Trade Receivables = x
  
  Closing Trade Receivables = 3 x
  
   Average trade receivable = Opening trade receivable +Closing trade receivable/2 1,00,000 = x+x3/2 Or,            2,00,000 = 4x Or,                        x = 50,000
  
  Opening Trade Receivables = x =  ` 50,000
  
  Closing Trade Receivables = 3x = 3 × 50,000 =  ` 1,50,000
  
  Case 3:
  
  Let Opening Trade Receivables = x
  
  Closing Trade Receivables = x + 3 x = 4x
  
   Average trade receivable = Opening trade receivable +Closing trade receivable/2 1,00,000 = x+4x/2 Or,            2,00,000 = 5x Or,                        x = 40,000
  
  Opening Trade Receivables = x =  ` 40,000
  
  Closing Trade Receivables = 4 x = 4 × 40,000 =  ` 1,60,000