What is average accounts receivable?

Average accounts receivable is the average amount of trade receivables on hand during a reporting period. It is a key part of the calculation of receivables turnover, for which the calculation is as follows: Average accounts receivable ÷ (Annual credit sales ÷ 365 Days)

What is a receivable in accounting?

A receivable is created any time money is owed to a firm for services rendered or products provided that have not yet been paid. This can be from a sale to a customer on store credit, or a subscription or installment payment that is due after goods or services have been received.

What is average accounts receivable (annual credit sales 365 days)?

Average accounts receivable ÷ (Annual credit sales ÷ 365 Days) The method used to calculate it can have a profound impact on the resulting calculation of the average collection period. Here are several variations on the concept, with a critique of each one: This is the ending receivable balance for the month.

How do you calculate average accounts receivables turnover?

The average receivables turnover is simply the average accounts receivable balance divided by net credit sales; the formula below is simply a more concise way of writing the formula. For the formulas above, average accounts receivable is calculated by taking the average of the beginning and ending balances of a given period.