The average collection period is determined by dividing the sum of the starting and ending receivables balances by the total annual credit sales.
The average collection period is determined by dividing the sum of the starting and ending receivables balances by the total annual credit sales. The amount of sales made on credit and in cash are both included in the total.
Cash sales are 20% of total sales where as remaining 80% sales are credit sales. Cash collection schedule prepared will display the actual cash collected from sales. The sales made on credit are collected in the following month.
1. Schedule of Cash Collection:
Particulars: January February March Quarter
Cash Sales $77,400 $77,400 $118,200 $273,000
Credit Sales $201,600 $201,600 $472,800 $876,000
Total Collections $279,000 $279,000 $591,000 $1,149,000
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