Question

Credit sales for the year is 100000 rupees and closing debitor are 10000 rupees. calculate the collection period of firm?
1. 10 days
2. 36.5 days
3.27.39 days
4. None of these

Answer 1

                              DEBTOR COLLECTION PERIOD

     Ans is option 2, 36.5 days (W)


(W)
            FORMULA: average debtor/ credit sales*365

          10,000/100,000*365 = 36.5 days

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Answer 2

The collection period of firm is 36.5 days

Explanation:

The computation of the collection period is shown below:

= (Closing debtor) ÷ (Credit sales) × total number of days in a year

= (₹10,000) ÷ (₹100,000) × 365 days

= 0.1 times × 365 days

= 36.5 days

The (Closing debtor) ÷ (Credit sales) is also known as the account receivable turnover ratio.

We assume the total number of days in a year is 365 days

Learn more

From the following information, calculate average collection period: Total sales rs.1,40,000 , cash sales ( included in total sales ) rs.30,000 , sales return rs.15,000 , total debtors at the end of the year rs.12,000 , bills receivable rs. 6,200 , bad debts provision rs. 3,000 , creditor rs. 12,000 ​

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