Credit Trading Flashcards
Credit advantages:
customers buy products they otherwise may not have been able to afford
generally the spend more than usually would
loyalty built up as it is convenient for repeat purchases to take place
credit disadvantages:
following up on overdue accounts is costly and time consuming
there is a risk customers will not pay their debts- this is called BAD DEBT and it is a loss to the business
what are prospective debtors
they are customer who may buy on credit:
first must be investigated to determine creditworthiness
credit limits should be set (how much you can buy)
regular statements sent out to debtors
Main object of national credit act:
regulate the granting of credit
promote fair access for consumers to get credit
promote responsible granting of credit
provide debt re-organsition where consumers becomes over- indebted
promote BEE in the credit industry
Key features of national credit act:
language in credit agreements must be simple and easy to understand
bindig quotes must be given
cost of credit must be advertised and this interest and fees are regulated
where credit denied must be reason
reckless granting of credit is not allowed
debt counselling is introduced
Type of cash payments:
-notes and coins
-cheques- large sums of money- instruction to the bank to make payment
-debit cards- money transferred from your account to person you are paying
travellers’ cheques- travelling different countries signed by travel agent
EFT (electronic fund transfer) directly transfers money from your account to another persons.
Types of credit payments:
Credit cards- given by the bank, the business you buy from claim money directly from bank and you pay bank back at later stage according to terms you have agreed.
credit on account- granted card by business supplies goods or services. given a time period to pay after buying goods (statement sent at end of month of you account to show how much you owe)
Credit instalment sale: hire purchase pay deposit on item brought and pay back over period of time in monthly instalments, could include interests and administrative charges.
Credit sales flow chart:
credit sales/ sales on account- debtor- duplicate credit sales invoice DJ= debtors journal general ledges (monthly) and debtors ledger (weekly)
