Question

From the following information, calculate Opening Trade Receivables and Closing Trade Receivables : 
Trade Receivables Turnover Ratio - 4 times 
Closing Trade Receivables were Rs 20,000 more than that in the beginning. 
Cost of Revenue from operations - Rs 6,40,000. 
Cash Revenue from operations \( \frac{1}{3} \)rd of Credit Revenue from operations 
Gross Profit Ratio - 20% 

Hint:

Steps for TRTR problems: 1. Find Credit Revenue (Sales): Total Sales = COGS / (1 - GPR). Credit Sales = Total Sales - Cash Sales (or use given relationship). 2. Find Average Trade Receivables = Credit Revenue / TRTR. 3. Use the relationship between Opening and Closing TR and Average TR formula to find individual values: Avg TR = (Opening TR + Closing TR) / 2.

Answer 1

To calculate the opening and closing trade receivables using the given information, follow these steps:

1. Calculate the Revenue from Operations (Total Revenue):
- Cost of Revenue from Operations = Rs. 6,40,000
- Gross Profit Ratio = 20%
- Cost of Revenue from Operations = Revenue from Operations * (1 - Gross Profit Ratio)
- Rs. 6,40,000 = Revenue from Operations * 0.8
- Revenue from Operations = Rs. 6,40,000 / 0.8 = Rs. 8,00,000

2. Calculate the Credit Revenue from Operations:
- Cash Revenue from Operations = (1/3) * Credit Revenue from Operations
- Total Revenue from Operations = Cash Revenue from Operations + Credit Revenue from Operations
- Rs. 8,00,000 = (1/3) * Credit Revenue from Operations + Credit Revenue from Operations
- Rs. 8,00,000 = (4/3) * Credit Revenue from Operations
- Credit Revenue from Operations = Rs. 8,00,000 * (3/4) = Rs. 6,00,000

3. Calculate the Average Trade Receivables:
- Trade Receivables Turnover Ratio = Credit Revenue from Operations / Average Trade Receivables
- 4 = Rs. 6,00,000 / Average Trade Receivables
- Average Trade Receivables = Rs. 6,00,000 / 4 = Rs. 1,50,000

4. Set up Equations for Opening and Closing Trade Receivables:
Let:
- Opening Trade Receivables = X
- Closing Trade Receivables = X + Rs. 20,000 (Given)

Therefore:
- Average Trade Receivables = (Opening Trade Receivables + Closing Trade Receivables) / 2
- Rs. 1,50,000 = (X + X + Rs. 20,000) / 2
- Rs. 3,00,000 = 2X + Rs. 20,000
- 2X = Rs. 3,00,000 - Rs. 20,000
- 2X = Rs. 2,80,000
- X = Rs. 1,40,000

5. Calculate the Opening and Closing Trade Receivables:
- Opening Trade Receivables (X) = Rs. 1,40,000
- Closing Trade Receivables = Rs. 1,40,000 + Rs. 20,000 = Rs. 1,60,000

Answer:
- Opening Trade Receivables: Rs. 1,40,000
- Closing Trade Receivables: Rs. 1,60,000