Question

    Given the following information, calculate the Trade Payables Turnover Ratio:

    Opening Sundry Creditors: ₹80,000

    Opening Bills Payable: ₹3,000

    Closing Sundry Creditors: ₹1,00,000

    Closing Bills Payable: ₹17,000

    Purchases: ₹14,00,000

    Cash Purchases: ₹5,00,000

    Purchases Return: ₹1,00,000

    A 6 times Correct Answer Incorrect Answer
    B 7 times Correct Answer Incorrect Answer
    C 8 times Correct Answer Incorrect Answer
    D 9 times Correct Answer Incorrect Answer
    E 10 times Correct Answer Incorrect Answer

    Solution

    The Trade Payables Turnover Ratio is calculated using the formula: Trade Payables Turnover Ratio = Net Credit Purchases / Average Trade Payables Net Credit Purchases = Purchases - Cash Purchases - Purchases Return Net Credit Purchases = ₹14,00,000 - ₹5,00,000 - ₹1,00,000 = ₹8,00,000 Average Trade Payables = (Opening Creditors and Bills Payable + Closing Creditors and Bills Payable) / 2 Average Trade Payables = (₹80,000 + ₹3,000 + ₹1,00,000 + ₹17,000) / 2 = ₹1,00,000 Trade Payables Turnover Ratio = ₹8,00,000 / ₹1,00,000 = 8 times

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