Stock velocity: 6 months
Creditors Velocity: 2 months
Debtors Velocity: 3 months
Gross Profit: 25%
Gross Profit for the year: Rs. 4,00,000/-
Closing stock of the year: Rs. 10,000 above than the opening stock.
Bill Receivable: Rs. 25,000
Bills Payable: Rs. 10,000/-
Sales, Purchases, Sundry Creditors, Sundry Debtors will be:
16,00,000/-; 12,10,000/-; 1,91,667; 3,75,000/-
Correct Answer15,00,000/-; 12,00,000/-; 2,01,667; 3,75,000/-
Incorrect Answer16,00,000/-; 12,00,000/-; 1,91,667; 4,00,000/-
Incorrect Answer10,00,000/-; 12,10,000/-; 1,91,667; 3,75,000/-
Incorrect AnswerExplanation:
Gross Profit Ratio = Gross Profit/Sales
0.25= 4,00,000/sales
Sales= 16,00,000/-
Purchases= COGS + Closing Stock – Opening Stock
COGS= 16,00,000 x 75/100 = 12,00,000/-
Purchases= 12,00,000 + 10,000 (Closing stock is more than opening Stock by 10,000) = 12,10,000/-
Creditors Velocity= Total Creditors and B.P./Credit Purchases x 12
2= Total Creditors and B.P./Credit Purchases x 12
2 x credit purchases = Total Creditors and B.P. x 12
Total Creditors and B.P.= 2 x 12,10,000/12= Rs. 2,01,667
Creditors= 2,01,667- 10,000= 1,91,667
Debtors Velocity= Total Debtors and B.R./Credit Sales x 12
3= Total Debtors and B.R./Credit Sales x 12
3 x 16,00,000 = Total Debtors and B.R. x 12
Total Debtors and B.R.= 3 x 16,00,000/12= Rs. 4,00,000/-
Debtors= 4,00,000 – 25,000/-= 3,75,000/-
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By: Vikas Goyal