CHAPTER 13 Flashcards
The Receivable Ledger
Credit control
- Credit limit
- Aged receivable analysis
Benefits of credit facilities
Allow business to keep trading without paying cash ‘up front’
Cost of offering credit facilities
1) Interest cost of an overdraft
2) Cost of trying to obtain payment
3) Court cost
Does PERSONAL account forms part of double entry system
No ! If they did, transaction would be recorded twice !!
Age analysis of receivables
Breaks down customer balances on the receivable ledger into different periods of outstanding debts
–> decide which debt to chase up
–> general guide whether debts are being collected quickly enough
Reasons to write off Irrecoverable Debts
- Bankrupt
- Out of business
- Dishonesty
- Customer from another country prevented from paying due to sudden foreign exchange control
* writing off IRD needs authorisation !!
Can sales tax on IRD be claimed ?
Yes , if and only if :-
- At least 6 months old
- Written off
Allowance for receivables
Estimate of the percentage of debts which are not expected to be paid
–> Specific
OR
–> Percentage
Increase in AFR is treated as …??
Expense
