Q. 83 DK Goel Accounting Ratios Solutions Class 12 CBSE (2024-25)

the solutions of Question number 83 of Accounting Ratios chapter 5 of DK Goel Class 12 CBSE (2024-25)

Calculate trade receivables turnover ratio from the following:

	₹
Credit Revenue from Operations (Credit Sales)	3,80,000
Revenue from Operations Returns (Sales Returns)	20,000
Trade Receivables on 1.04.2022	70,000
Trade Receivables on 31.03.2023 ₹ 1,10,000 Less: Provision for Doubtful Debts ₹ 10,000	1,00,000

State Giving reason, what will be effect of the following on Trade Receivables Turnover Ratio:

(i) Received ₹ 20,000 from a customer.

(ii) Sale of goods on credit ₹ 30,000.

(iii) Cash Revenue from Operations ₹ 40,000.

[Ans. Trade Receivables Turnover Ratio 4 times. Effect on Trade Receivables Turnover Ratio: (i) Increase (ii) Decrease (iii) Not alter.

Hint: Provision for Doubtful debts are ignored while calculating Trade Receivables Turnover Ratio.

Solution:-

(i) Received ₹ 20,000 from a customer:

It will reduce the Closing Debtors reducing the Average Debtors, further it will reduce the denominator and nominator remain intact. the Trade receivable turnover ratio will increase

T/R Turnover Ratio = Net Credit Revenue from Operations/Average Debtors

Average T/R = 70,000 + 90,000 = 1,60,000/2 = ₹ 80,000

T/R Turnover Ratio = 3,60,000/80,000 = 4.5 times.

(ii) Sale of goods on credit ₹ 30,000:-

It will increase the net credit revenue from opeations and would also increase closing Trade Receivables. It will reduce the overall Trade Receivable Turnover Ratio as follows:

Net Credit Revenue from Operations = ₹ 3,60,000 + ₹ 30,000 = ₹ 3,90,000

Closing Trade Receivables = ₹ 1,10,000 + ₹ 30,000 = ₹ 1,40,000

Average Trade Receivables = ₹ 70,000 + ₹ 1,40,000 = ₹ 2,10,000/2 = ₹ 1,05,000

Trade Receivables Turnover Ratio = 3,90,000/1,05,000 = 3.71 times.

(iii) Cash Revenue from Operations ₹ 40,000

It will not imact either net credit revenue from operations or average trade receivables. It will not alter the Trade Receivable turnvoer ratio.