The Average Collection Period Is Calculated by Dividing Total Sales

question 32

True/False

The average collection period is calculated by dividing total sales by accounts receivable.It is an effective measure for internal use in monitoring a firm's collections.

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Definitions:

Accounts Receivable Subsidiary Ledger

A detailed ledger that tracks individual transactions with customers, supporting the summary balances shown in the main accounts receivable account.

Accounts Payable

Accounts payable refers to the amounts owed by a company to its creditors for goods or services received that have not yet been paid for.

Nominal Accounts

Accounts that are closed at the end of each accounting period; includes revenue, expense, and withdrawal accounts.

Sales Journal

A specialized accounting journal used to record all sales transactions of a company on credit.