Chapter 7, Problem 5MCQ

To determine

Net sales:

It refers to the sales that do not include the sales returns. The formula for net sales is,

$\text{Net}\text{Sales}=\text{Total}\text{Sales}-\text{Sales}\text{Returns}$

Accounts Receivable:

It refers to the amount that is to be received by a company for providing goods and services on credit. It is an asset account.

Accounts Receivable Turnover:

It refers to the ratio that shows the number of times a company achieves its average accounts receivable. The formula for accounts receivable turnover is,

$\text{Accounts}\text{Receivable}\text{Turnover}=\frac{\text{Total}\text{Credit}\text{or}\text{Net}\text{Sales}}{\text{Average}\text{Accounts}\text{Receivable}}$

To identify: The correct option for accounts receivable turnover.