The Formula for Calculating the Average Collection Period for Accounts

question 42

Multiple Choice

The formula for calculating the average collection period for accounts receivable in days is:

• A) Average receivables divided by net credit sales
• B) Net credit sales divided by average receivables
• C) 365 divided by average receivables
• D) Average receivables x 365 divided by net credit sales

Identify the circumstances under which estimated inventory costing methods are used.

Calculate estimated ending inventory and understand its impact on financial statements.

Comprehend the distinctions and applications of the perpetual and periodic inventory systems.

Understand the documentation flow in inventory management and control.

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Definitions:

Profits

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Deregulation

The removal or reduction of government restrictions and regulations in an industry to encourage increased competition.

Reduced Prices

The offering of goods and services at lower rates than originally marked, often to clear inventory or boost sales.

Competition

The economic rivalry among businesses to attract customers, increase sales, and achieve a higher market share.