Could you please help in confirming the formula for Account receivable turnover ratio. Does it use average gross receivables or Net receivables.
Below is a question for your reference. Please help with the answer-
ARTO should use net receivables, not gross. Think if it this way, when we reserve for doubtful accounts, we reduce gross sales as well (Cr. Allowance for doubtful accouns, Dr. Sales). Therefore, ARTO is net sales/avg net receivables.
Institute of Management Accountants
10 Paragon Drive, Suite 1
Montvale, New Jersey 07645-1760 USA
(800) 638-4427 or +1 (201) 573-9000
© 2023 Institute of Management Accountants. All rights reserved.