Question

Which of the following is / are the limitations of Day's Sales Outstanding (DSO) and Ageing Schedule ( AS )?

• A. Both are influenced by the payment behaviour of customers
• B. Both are influenced by the sales pattern
• C. Both are based on an aggregation of sales and receivables.
• D. All of the above
• E. Both (B) and (C) above

Answer 1

The correct option is D All of the above

The average number of days sales outstanding at any time is called the days sales outstanding given by the formula = accounts receivable at the time chosen / average daily sales. The age wise distribution of accounts receivable at a given time is depicted in the ageing schedule. All the statements given in the options are limitations of days sales outstanding and ageing schedule.