How do I caculate credit sales?
May 20th, 2010
I am working on this textbook question:
A Ltd’s credit sales are collected as follows:
Month of sale – 50%
1st Month after sale – 30%
2nd Month after sale – 15%
Bad Debts – 5%
Budgeted sales data for Jan-April is:
Jan – £100,000
Feb – £160,000
March – £180,000
April – £120,000
What is the amount creveived in April for credit sales ONLY?
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Credit sales received in April will be as below…
April – 50% of 120,000 = 60,000
March – 30% of 180,000 = 54,000
Feb – 15% of 160,000 = 24,000
total = 138,000
In April you get 50% of April sales so 60,000
you also get 30% of Mar sales so 54000
you also get 15% of Feb sales so 24000
Total of 138,000
You don’t count the 5% because that is being written off as bad debt. The company is saying that on average 5% of all credit sales will not be collected because the customer will default on them.
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