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: ₹1,00,000Solution
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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