The credit revenue from operations of Harini Ltd. amounted to Rs. 9,6

1.	The credit revenue from operations of Harini Ltd. amounted to Rs. 9,60,000. Its debtors and bills receivable at the end of the accounting period amounted to Rs. 1,00,000 and Rs. 60,000, respectively. Calculate trade receivable turnover ratio and also collection period in months.
Answer» Trade receivalbles turnover ratio = (Credit revenue from operations)/(Average trade receivable) Average trade Receivables = Debtors + Bills receivable Average Trade Receivables = (1,10,000 + 1,40,000)/2 = 2,50,000 times Trade receivable turnover ratio = 10,00,000/2,50,000 = 4 times Debt collection period = (Number of months in a year)/(Trade receivable turnover ratio) = 12/4 = 3 months.

The credit revenue from operations of Harini Ltd. amounted to Rs. 9,60,000. Its debtors and bills receivable at the end of the accounting period amounted to Rs. 1,00,000 and Rs. 60,000, respectively. Calculate trade receivable turnover ratio and also collection period in months.

Answer»

Trade receivalbles turnover ratio = (Credit revenue from operations)/(Average trade receivable)

Average trade Receivables = Debtors + Bills receivable Average

Trade Receivables = (1,10,000 + 1,40,000)/2

= 2,50,000 times

Trade receivable turnover ratio = 10,00,000/2,50,000

= 4 times

Debt collection period = (Number of months in a year)/(Trade receivable turnover ratio)

= 12/4 = 3 months.