The Average Collection Period for Receivables Is Computed by Dividing

question 71

Multiple Choice

The average collection period for receivables is computed by dividing 365 days by

• A)net credit sales.
• B)average accounts receivable.
• C)ending accounts receivable.
• D)accounts receivable turnover.

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Definitions:

Days' Sales Uncollected

A financial ratio that measures how efficiently a company is collecting revenue from its credit sales by calculating the average number of days that sales remain uncollected.

Voucher System

A financial control mechanism in accounting where vouchers are created for each transaction, and supporting documents are required for authorization before payment.

Bank Statement

A summary of financial transactions which have occurred over a given period on a bank account held by a person or business with a financial institution.

Deposits

Funds placed into a bank account or with some other entity for safekeeping, which can include money put in savings or checking accounts.