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
  1. Why is Average Collection Period important to a company?

    Discover why the average collection period can be a particularly important accounting ratio for a company that relies heavily ... Read Answer >>
  2. In which industries is Average Collection Period most important?

    Find out which industries are most concerned with average collection period, and how different types of companies interact ... Read Answer >>
  3. How can a creditor improve its Average Collection Period?

    Read about some of the ways that a business can improve its accounts receivable management practices to shorten its average ... Read Answer >>
  4. What's the difference between a trial balance and a balance sheet?

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