# How to Calculate Average Accounts Receivable

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Accounts receivable is the amount of money other people or companies owe you. Average accounts receivable looks at the accounts receivable balance at the beginning of the year as well as the end of the year. These numbers are on a company's balance sheet in the assets section. The average accounts receivable is an important calculation used to determine other business ratios such as accounts receivable turnover.

Find the company's accounts receivable at the beginning and the end of the year on the company's balance sheet. For example, a company has \$40,000 of accounts receivable on Jan. 1 and \$60,000 of accounts receivable on Dec. 31.

Add together the beginning and ending accounts receivable. In the example, \$40,000 plus \$60,000 equals \$100,000.

Divide the sum of the accounts receivable by two. In the example, \$100,000 divided by two equals an average accounts receivable of \$50,000.

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