Blog

Calculate Trade Payables Turnover Ratio for the year 2018-19 in each of the alternative cases: Case 1 : Closing Trade Payables Rs. 45,000; Net Purchases Rs. 3,60,000; Purchases Return Rs. 60,000; Cash Purchases Rs. 90,000. Case 2: Opening Trade Payables Rs. 15,000; Closing Trade Payables Rs. 45,000; Net Purchases Rs. 3,60,000.  Case 3: Closing Trade Payables Rs. 45,000; Net Purchases Rs. 3,60,000. Case 4: Closing Trade Payables (including Rs. 25,000 due to a supplier of machinery) Rs. 55,000; Net Credit Purchases Rs. 3,60,000.

SOLUTION

Case 1

Net Credit Purchases = Net Purchases − Cash Purchases
= 3,60,000 − 90,000
= 2,70,000

Trade Payables Turnover Ratio = Net Credit Purchases / Closing Trade Payables
= 2,70,000 / 45,000
= 6 times

Case 2

Net Purchases = 3,60,000
Average Trade Payables = Opening Trade Payables + Closing Trade Payables / 2
= 15,000 + 45,000 / 2
= 30,000

Trade Payables Turnover Ratio = Net Credit Purchases / Average Trade Payables  
= 3,60,000 / 30,000 
= 12 times

Case 3

Trade Payable Turnover Ratio = Net Credit Purchases / Closing Trade Payables 
= 3,60,000 / 45,000 
= 8 times

Case 4

Net Credit Payables for Goods = Trade Payables − Creditors for Machinery
= 55,000 − 25,000
= 30,000

Trade Payables Turnover Ratio = Net Credit Purchases / Average Trade Payables 
= 3,60,000 / 30,000
= 12 times

Leave a Reply