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Calculate creditors turnover ratio and average payment period from the following information:

Total Purchases4,00,000
Cash Purchases (included in above)50,000
Purchases Returns20,000
Creditors at the end60,000
Bills payable at the end20,000

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Creditors Turnover Ratio = Credit purchases / average trade creditors 

= (Total Purchases – Cash Purchases – Purchase Returns) /(closing creditors + closing Bills payable) 

= (4,00,000 – 50,000 – 20,000) / (60,000 + 20,000) 

=(3,30,000 /80,000) 

= 4.13 times 

Average payment period = 365 /Creditors Turnover Ratio 

= (365 /4.13)

= 88 days (approx.)

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