Account for A/C receivables Flashcards
1
Q
Why do businesses provide A/C receivables
A
1) Marketing
2) Norm of the market, to stay competitive
2
Q
3 disadvantages of A/C receivables
A
1) Opp cost
2) Admin cost for the business
3) Bad debts (people not paying)
3
Q
Bad vs doubtful debt
A
Bad debt - When you’re certain that the client won’t be able to pay
Doubtful debt - When your client may not be able to pay the amount due to uncertainty
4
Q
3 Control procedures
A
1) Assess the creditworthiness of customers
2) Determine the credit term :
- credit period
- credit term
3) Collection procedures :
- ageing schedule
- ratio analysis
5
Q
Bad debt - Dr & Cr
A
Dr - Bad debts xx
Cr - A/c receivables xx
6
Q
Allowances for B&D debt - Dr & Cr
A
Dr - Bad & Doubtful debt xx
Cr - Allowance for Bad & Doubtful debt xx
