Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 8 - Reporting and Analyzing Receivables - Questions: 8

Answer

1) Pros and cons of easy credit: The credit is very lucrative. It is the best tool in the hands of sale personal to make more sales. The customer also gets interested when he comes to know about easy credits. The sales of the company will touch the new heights. Profits will shoot up. Everyone will feel good. 2) Accounting implications: Accounting implications in easy credits is to keep a track of out standings. All sales and its collections should be immediately booked.

Work Step by Step

1) When it comes to the cost of easy credit, it is painful. You can sale on easy credit to customer, but getting the same on easy credit is not in our hands. There we may lose the interest or in the shape of higher costs. The collection will also be difficult. If the collections are immediate, it is easy. Once it is delayed, the collections will come with great difficulty. It is therefore necessary that the company should have a moderate credit policy, which can give the sales and collections. 2) The list of out standings should be drawn periodically and necessary follow-up should be made. Bad debt, if any should be dealt with as per the company's policy immediately.
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