Read the passage carefully and answer the next five questions (value in fraction is to be rounded off to the nearest value).
| Particulars | Amount (₹) |
| Revenue from operations | 8,75,000 |
| Creditors | 90,000 |
| Bills receivable | 48,000 |
| Bills payable | 52,000 |
| Purchases | 4,20,000 |
| Trade debtors | 59,000 |
Average collection period is -
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 45 days
The average collection period shows in how many days, on average, the firm collects its trade receivables. It is 365 days divided by the trade receivables turnover ratio.
Trade receivables = Trade debtors + Bills receivable = Rs. 59,000 + Rs. 48,000 = Rs. 1,07,000
Trade Receivables Turnover Ratio = Rs. 8,75,000 ÷ Rs. 1,07,000 = 8.18 times
Average Collection Period = 365 ÷ 8.18
= 44.6, that is 45 days
Bills receivable are part of trade receivables; leaving them out would give a much shorter period.
NCERT (2026-27 edition):
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