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Hi sir in part a (ii) i do not understand how the trade recievables at start of jan 20×7 are calculated. the answer says that 100% of december 20×6 receivables will be outstanding but the question states that 60 % of customers pay within 30 days. surely it’s 30 days from december to the start of january so shoudn’t only 40% be outstanding in january?
Yes, and that is all that the examiner has included.
There was 408,350 owing at the start of January. This includes 300,000 from December’s sales. 60% of the January sales (180,000) will have paid in January and this has been subtracted from the brought forward in arriving at the amount still owing at the end of January.
(The 408,350 will also have included 40% of Novembers sale’s which will have been received in January, so this has been subtracted as well. None of January’s sales will have paid, and so they are added on.)
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