Average Collection Period Formula
The formula to find out average collection period is
Here, the Total accounts receivable = Debtors + Bills receivable.
Calculation of Average Collection Period
Calculate Average Collection Period from the following information.
Sankaram k Co makes both cash sales and credit sales. From the following information, calculate the average collection period.
Note: While calculating average collection period, only good sundry debtors should be taken into account. Hence Reserve for Doubtful Debts should be deducted from closing debtors. However, some authors do not hold this view. In that case, average collection period will be 55 days.