Collection float is the __________.
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A. B. C. D.A
Collection float refers to the duration between the time when a customer mails a check and the time when the cash becomes available to the receiving firm. It is an essential concept in cash management and plays a crucial role in determining the firm's cash position and the efficiency of its collections process.
A. Total time between the mailing of the check by the customer and the availability of cash to the receiving firm - This option correctly describes the concept of collection float. It includes the time taken for the check to travel through the mail, the time taken for the receiving firm to process the check, and the time taken for the funds to be credited to the firm's account.
B. Time consumed in clearing the check through the banking system - This option refers to the clearing float, which is the duration between the time when a check is deposited, and the funds become available to the depositor. It includes the time taken for the check to be presented to the paying bank, the time taken for the paying bank to verify the signature and ensure sufficient funds are available, and the time taken for the funds to be transferred to the receiving bank.
C. Time the check is in the mail - This option only considers the time taken for the check to travel through the mail and does not account for the time taken for the receiving firm to process the check or the time taken for the funds to be credited to the firm's account.
D. Time during which the check received by the firm remains uncollected - This option refers to the availability float, which is the duration between the time when funds are credited to the firm's account and the time when the firm can use the funds. It includes the time taken for the bank to credit the funds to the firm's account, the time taken for the firm to verify the funds' availability, and the time taken for the funds to clear any holds or restrictions.
Therefore, the correct answer is A, Total time between the mailing of the check by the customer and the availability of cash to the receiving firm.