Accounting Dictionary - Letter A
(also called days sales outstanding) measures the average number of days that accounts receivable are outstanding. Accounts receivable collection period measures the average number of days between sending invoices to customers and collecting payments from them. To calculate this ratio, the average accounts receivable are divided by the average daily sales in the period. The average accounts receivable can be determined by adding beginning accounts receivable to ending accounts receivable and dividing the result by two. The average daily sales can be determined by dividing the sales for the period (e.g., a year) by the number of days in the period (e.g., 365 days).
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