PRC-1 · Chapter 5 · Question 72 of 100
The turnover of a business was Rs. 2,000,000. Trade receivables are 5% of turnover. The business wishes to have an allowance of 4% of receivables, which would make the allowance one-third higher than the opening allowance. What was the opening allowance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 3,000
Explanation
Receivables = 5% of 2M = 100,000. Closing allowance = 4% of 100,000 = 4,000. If 4,000 is 1/3 higher than Opening (X), then 4,000 = X + (1/3)X = (4/3)X. Therefore, X = 3,000.
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