CS Executive · Corporate Accounting and Financial Management · Working Capital Management
Mehta Traders has annual credit sales of Rs 36,00,000 and allows customers 60 days credit. Assuming a 360-day year and that all customers pay exactly on the due date, what is the average receivables balance (at sales value)?
Average receivables equal daily credit sales multiplied by the collection period. Daily sales are Rs 36,00,000 divided by 360, which is Rs 10,000. Multiplied by 60 days, receivables are Rs 6,00,000 when all customers pay on the due date.
- ARs 3,00,000
- BRs 6,00,000Correct
- CRs 60,000
- DRs 12,00,000
Explanation
Daily credit sales = 36,00,000/360 = Rs 10,000. Average receivables = 10,000 x 60 = Rs 6,00,000. Rs 3,00,000 wrongly uses 30 days; Rs 60,000 uses only 6 days.
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