Read the following information carefully and answer the next 5 questions:
| PARTICULARS | AMOUNT (₹) |
| Revenue from operations | 8,75,000 |
| Creditors | 90,000 |
| Bills Receivables | 48,000 |
| Bills Payables | 52,000 |
| Purchases | 4,20,000 |
| Trade debtors | 59,000 |
Calculate average payment period.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 123 days
Average payment period = 365 ÷ Trade payables turnover ratio
Trade payables = Creditors + Bills payable
= ₹90,000 + ₹52,000
= ₹1,42,000
Trade payables turnover ratio = Purchases ÷ Trade payables
= ₹4,20,000 ÷ ₹1,42,000
= 2.96 times
Average payment period = 365 ÷ 2.96
= 123.3, i.e. 123 days
Only year-end figures are given, so they are used as the average, and all purchases are taken as credit purchases.
NCERT (2026-27 edition):
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