Question

debtors rs 40000 b/r rs 20000 credit sales for the year rs 240000 and hence average collection period in month is​

Answer 1

Answer:

3 months

Explanation:

avg. collection period = ((avg. debtor|/Trade receivables)/net credit sales) × 12 months or 365 days

Answer 2

Answer:

correct answer.would be 3 months

Explanation:

average collection time = (average debtor|/Trade receivables)/net credit sales) × 12 months or 365 days

The average collection period is derived by dividing a company's annual accounts receivable balance by its total net sales for the previous year, then multiplying that sum by 365 to get a number in days.

What does it imply to have an average collecting period:

The average collection period is the time it takes for a company to collect and convert its accounts receivable into cash. It's one of six key metrics for determining short-term liquidity, or a company's capacity to pay its obligations (current liabilities) when they come due.

A typical collecting period is exemplified by the following examples.

Let's pretend it's on an annual basis in this example. Then you'd perform the following: 365 times ($100,000 / $1,000,000). This would result in a 36.5-day average collecting period. This would be a good collecting duration, given that the average collection period is 30 days.