Accounting Dictionary - Letter A
(also called days purchases in accounts payable) examines the relationship between credit purchases and payments for them. Accounts payable payment period measures the average number of days it takes an entity to pay its suppliers. To calculate this ratio, the average accounts payable are divided by the average daily cost of sales in the period. The average accounts payable can be determined by adding beginning accounts payable to ending accounts payable and dividing the result by two. The average cost of sales can be determined by dividing the cost of sales for the period (e.g., a year) by the number of days in the period (e.g., 365 days).
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