Non current assets & Receivables and Irrecoverable debts

Question 1

What are the 3 types of non current assets

Answer 1

1) Tangible: Physical objects such as property, plants & equipment.
2) Intangible: Abstract objects such as brands, licences and patents.
3) Investments: shares.

Question 2

How can the incorrect classification of Capital & Revenue expenditure have an impact on profits?

Answer 2

1) Treating cost as C.E rather then expenses will be higher and profits lower.
2) Treating the cost as capital rather than R.E then expense will be lower and profits higher.

Question 3

What are credit sales, why do they exist and what are they’re issues?

Answer 3

1) They’re sales made on credit to customers(receivables).
2) This could be because:
It’s an industry norm/expectation
Allows for increase in sales revenue
Creates customer loyalty
3) However they’re disadvatageous as they’re:
Late payments.
Customers not paying at all.
Could impact cashflows & costs.

Question 4

What are aged receivables analysis?

Answer 4

It’s a controls function used to keep track of outstanding debts & follow ups through a list of receivables by name, how much they owe and age of debts.

Question 5

Name 4 Credit Controls

Answer 5

1) Check financial situation of customers
2) Set credit limits
3) Offer discounts for right-time payments
4) Follow ups(calls, legal action)