Skip to content

ACCA Applied Knowledge · Management Accounting · Performance measurement - application

Drayton Ltd has revenue of $1,200,000, of which 75% is on credit. Year-end trade receivables are $90,000. Using year-end receivables and credit sales, what is the receivables collection period, in days (365-day year, to the nearest day)?

The collection period is about 36 days on the intended calculation: receivables of $90,000 divided by credit sales of $900,000, multiplied by 365, giving roughly 36.5 days. Using total revenue instead would give only 27 days, which is wrong.

  1. A27 days
  2. B36 daysCorrect
  3. C44 days
  4. D30 days

Explanation

Credit sales = 1,200,000 x 75% = 900,000. Days = 90,000 / 900,000 x 365 = 36.5, which is 36 or 37 depending on rounding; precisely 36.5 rounds to 37, so use data check: 90,000/900,000 = 0.1 x 365 = 36.5.

Did you get it right without looking?

One question tells you little. A timed set on Performance measurement - application shows your real accuracy, how long you take and where you lose marks.

Practise Performance measurement - applicationFree diagnostic mock

More Performance measurement - application questions