ACCOUNTS RECEIVABLE Definition

ACCOUNTS RECEIVABLE is a current asset representing money due for services performed or merchandise sold on credit.

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DAYS SALES OUTSTANDING (DS0), also known as Collection Period (period average), is a financial indicator that shows both the age, in terms of days, of a companys accounts receivable and the average time it takes to turn the receivables into cash. It is compared to company and industry averages, as well as company selling terms (e.g., Net 30) for determination of acceptability by the company. DSO is calculated: DSO = (Total Receivables/Total Credit Sales in the Period Analyzed) x Number of Days in the Period Analyzed. Note: Only credit sales are to be used. Cash sales are excluded.

INDIRECT COST is that portion of cost that is indirectly expended in providing a product or service for sale (cannot be traced to a given cost object in an economically feasible manner) and is included in the calculation of COST OF GOODS SOLD, e.g. rent, utilities, equipment maintenance, etc. Opposite of direct cost.

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