Credit sales of a firm in a certain year amounted to ₹ 12,00,000 and the sundry debtors outstanding at…
Average Debtors = (Opening Debtors Rs. 1,20,000 + Closing Debtors Rs. 80,000) / 2 = Rs. 1,00,000. Debtors Turnover Ratio = Credit Sales / Average Debtors = Rs. 12,00,000 /…
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Credit sales of a firm in a certain year amounted to ₹ 12,00,000 and the sundry debtors outstanding at the beginning and the end of the year amounted to ₹ 1,20,000 and ₹ 80,000 respectively. Indicate the correct code for the debtors turnover ratio and the average collection period from the following :
Answer and explanation
Correct answer B
Average Debtors = (Opening Debtors Rs. 1,20,000 + Closing Debtors Rs. 80,000) / 2 = Rs. 1,00,000. Debtors Turnover Ratio = Credit Sales / Average Debtors = Rs. 12,00,000 / Rs. 1,00,000 = 12 times. Average Collection Period = 12 months / 12 = 1 month.
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