Accounting Online Program Certification Practice Test

What is the closing balance on trade receivables for the period ending 31 May?

1. £32,125

2. £30,100

3. £35,000

4. £31,475

The correct answer is: £32,125

To determine the closing balance on trade receivables for the period ending 31 May, it is essential to consider how trade receivables are calculated. Trade receivables represent amounts owed to the business by customers for goods or services delivered but not yet paid for. The closing balance of trade receivables can be calculated by taking the opening balance, adding any new credit sales made during the period, and subtracting any cash collections from customers and any adjustments for bad debts or discounts given. In this case, if the calculations leading to £32,125 take into account all relevant transactions and adjustments, it indicates that after considering all sales and collections, that amount accurately reflects what customers owe at the end of the period. This is crucial as it provides an updated figure that will be important for future cash flow projections and financial analysis. The validity of the closing balance also depends on ensuring that all transactions have been recorded properly. If this figure matches the calculated trade receivables after accounting for all transactions, it confirms the accuracy and reliability of this figure in representing the business's financial situation at that date. Thus, the closing balance of £32,125 appropriately reflects the total owed from customers.