Calculate AP’s forecast trade receivables days outstanding at 31 March 20X7?

Sophljon
Sophljon Registered Posts: 7
AP had a balance on trade receivables at 30 September 20x6 of £68,000. Forecast credit sales for the next six months are £250,000 and customers are expected to return goods with a sales value of £2500.
Based on past experience, within the next six months AP expects to collect £252,100 cash and to write off, as irrecoverable debts, 5% of the balance outstanding at 30 September 20X6

Answers

  • Sophljon
    Sophljon Registered Posts: 7
    Please can someone help with the above I can’t get my head around it
  • PeterC
    PeterC Registered, Tutor Posts: 225
    If you are looking for the closing balance on the Receivable Control Account, after 3 months, it is £60,000 (Dr), as shown below



    If you prefer this as a T-account, I have shown which entries would be Dr and which Cr

    Sophljon
  • Sophljon
    Sophljon Registered Posts: 7
    Thank you Peter, I did this part this question then goes on to ask you how many receivable days are outstanding at 31 March 20X7? Please would you be able to assist with this part?
  • PeterC
    PeterC Registered, Tutor Posts: 225
    There are a few different definitions of receivable days
    One of these is
    365 x average receivables/net credit sales

    Average receivables = (68,000 + 60,000)/2 - £64,000
    Net credit sales = 250,000 - 2,500 = £247,500
    Receivable days = 365 x 64,000/247,500 = 94 days
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