Question

The opening balance of Accounts Receivable for Sheridan Company was $23500. Net sales (all on account) for the year amounted to $199000. The Company doesn’t offer any cash discount. During the year $164000 was collected on accounts receivable. Compute accounts receivable turnover for the year.

Answer 1

The accounts receivables turnover is 4.85 times

Step-by-step explanation:

The accounts receivable turnover is a ratio to check the efficiency of the credit and collection department of a firm. It tells on average, how many time the business collects its average accounts receivables. The formula to calculate the accounts receivables turnover is,

Accounts Receivables turnover = Net Sales / Average Accounts receivables

Where,

Average Accounts Receivables = (Opening Accounts Receivables + Closing Accounts Receivables) / 2

The amount of closing accounts receivables for the year is,

Closing accounts receivables = 23500 + 199000 - 164000

Closing accounts receivables = $58500

Average accounts receivables = (23500 + 58500) / 2 = $41000

Accounts receivables turnover = 199000 / 41000 = 4.85 times