Join Sarthaks eConnect Today - Largest Online Education Community!
0 votes
7 views
asked in Accounts by (43.9k points)

An extract from Gupta & Co. reveals the following: 

Inventory as on 1st July, 201423,500
Purchases2,23,000
Inventory as on 30 June 201521,500
Sales (all credit)8,21,250
Accounts Receivable balance as on 30 June 20151,57,500

Calculate: 

(a) Inventory turnover ratio 

(b) Accounts recievable turnover ratio 

(c) Collection Period

1 Answer

+1 vote
answered by (46.8k points)
selected by
 
Best answer

(a) Inventory Turnover Ratio = Cost Of Goods Sold / Average Inventory 

Where, Cost of Goods Sold = opening stock + purchases – closing stock 

= 23,500 + 2,23,000 – 21,500 = Rs.2,25,000 

And Average Inventory = (Opening stock + closing stock) / 2 

= (23,500 + 21,500) /2 = Rs. 22,500 

Inventory Turnover Ratio = (Rs.2,25,000 / Rs. 22,500) 

= 10 times

(b) Accounts Receivable Turnover Ratio = Credit Sales / Average Accounts Receivable 

= (8,21,250 / 1,57,500) 

= 5.214 

(c) Collection Period = Days in a year / Debtors’ turnover ratio 

= (365 / 5.124) 

= 71.23 days 

= 72 days approx.

Related questions

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.

One Thought Forever

“There is a close connection between getting up in the world and getting up in the morning.“
– Anon
~~~*****~~~

Categories

...