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Monday, May 2, 2011

Average Collection Period Example

Definition: Average Collection Period (or Average credit given) is used to calculate the average number of days that debtors take to discharge their debts.

Formula:
Average Collection Period = (Average Trade Debtors / Net Credit Sales) * No. of Days

Example 1:
If credit sales is $52,000; Sales returns $2,000; Debtors $6,000; Bills Receivables $4,000.
Then, Trade Debtors = 6,000 + 4,000 =

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