Average Collected Balance

DEFINITION of 'Average Collected Balance'

The average balance of collected funds (less any uncleared or uncollected deposits) in a bank account over a specified period, usually one month. The average collected balance is calculated by adding the daily collected balance and dividing by the number of days in the period.

BREAKING DOWN 'Average Collected Balance'

The average collected balance is used to determine the amount of interest to be paid on a monthly balance, since uncollected funds do not earn interest. For most individuals, the difference between the average daily balance and average collected balance will be small, but for businesses it may be very large.

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RELATED FAQS
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    See how reducing a company's average collection period can help cash flow, and learn why collections practices are so important ... Read Answer >>
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    Discover why the average collection period can be a particularly important accounting ratio for a company that relies heavily ... Read Answer >>
  3. How can a creditor improve its Average Collection Period?

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