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Trade payables payment period

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Trade payables payment period

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by AvatarJohn Moffat.
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  • January 24, 2021 at 6:55 am #607718
    Avatarapplessauce
    Member
    • Topics: 85
    • Replies: 65
    • ☆☆

    Which of the following is likely to reduce the trade payables payment period?

    A Paying trade suppliers within seven days of reciept of invoice to obtain a discount

    B Buying an increasing volume of credit purchases during an accounting period

    Sir the correct answer was A
    I was wondering why isn’t B the answer because in the formula for trade payable period it is.
    (trade payables/credit purchases )*365

    so if credit purchases changes then trade payable period also could change right???

    January 24, 2021 at 10:39 am #607748
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54843
    • ☆☆☆☆☆

    B is wrong because if they buy more then they will be owing more. It doesn’t affect how long they take to pay their suppliers, which is what the payables payment period is measuring.

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