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Rs. 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 Rs. 7,000 more than that in the beginning.

SOLUTION

Trade Receivable Turnover Ratio = Net Credit Sales / Average Trade Receivables
8 = 1,75,000 / Average Trade Receivables
Average Trade Receivables = Rs. 21,875

Let Opening Trade Receivables = x
∴ Closing Trade Receivables = x + 7,000

Average Trade Receivables = Opening Trade Receivable + Closing Trade Receivable / 2
21,875 = x+ x + 7,000 / 2
or, 43,750 = 2x + 7,000
or, 2x = 36,750
or, x = Rs. 18,375

∴ Opening Trade Receivables = x = 18,375
Closing Trade Receivables = x + 7,000 = 25,375


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