Certified Management Accountant Practice Exam 2025 - Free CMA Practice Questions and Study Guide

The average accounts receivable is calculated using the formula that takes the sum of the beginning accounts receivable and the ending accounts receivable and divides it by two. This method provides a straightforward way to determine the average balance of accounts receivable over a specific period, allowing for a better understanding of how effectively a company is managing its credit sales.

This calculation is particularly useful because it smooths out fluctuations that can occur at the beginning or end of the period, offering a more stable view of a company's receivables. For instance, if a business experiences seasonal sales patterns, the average balances will give a clearer picture compared to taking just the ending amount.

The other methods mentioned involve sales and turnover calculations, which do not focus on determining the average balance of accounts receivable directly. These alternatives may be used for other financial ratios but do not specifically address the average accounts receivable itself.