[amp_mcq option1=”60 days” option2=”45 days” option3=”42 days” option4=”72 days” correct=”option1″]<\/p>\n
The correct answer is A. 60 days.<\/p>\n
The daily average of credit sales is calculated by dividing the net sales for the whole year by the number of days in a year. In this case, the net sales for the whole year is Rs. 2,50,000 and the number of days in a year is 365. Therefore, the daily average of credit sales is Rs. 2,50,000 \/ 365 = Rs. 684.93.<\/p>\n
However, the debtor is Rs. 50,000. This means that the company has not yet received payment for Rs. 50,000 of the sales that it made during the year. Therefore, the daily average of credit sales that the company has actually received is Rs. 2,50,000 – Rs. 50,000 = Rs. 2,00,000 \/ 365 = Rs. 547.17.<\/p>\n
Since the company has not yet received payment for Rs. 50,000 of the sales that it made during the year, the company’s average collection period is 50,000 \/ 2,000,000 = 0.25 = 25%. This means that the company takes an average of 25% of a year, or 60 days, to collect its receivables.<\/p>\n
Option B is incorrect because it is the average collection period for a company that has no outstanding receivables. Option C is incorrect because it is the average collection period for a company that has a 50% collection rate. Option D is incorrect because it is the average collection period for a company that has a 100% collection rate.<\/p>\n","protected":false},"excerpt":{"rendered":"
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