Why should a company have clear strategy for collecting Accounts receivable from its customers? For example, some companies do offer discounts to customer for early payment instead collecting the full amount at the due date.

Why should a company have clear strategy for collecting Accounts receivable from its customers? For example, some companies do offer discounts to customer for early payment instead collecting the full amount at the due date.

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter5: Managing Checking And Savings Accounts

Section: Chapter Questions

Problem 1LTAI

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"Factoring" occurs when a business sells some of its accounts receivable to another insitution so it can receive cash immediately instead of having to wait until the receivables can be collected. True or False
"In accounts receivable management, credit analysis is the process of determining the probability that customers will not pay."
When a large account receivable balance is due from one client it is logical to use the direct write-off method to adjust the bad debt expense and accounts receivable balance. Under different circumstances, another method is used called the allowance method. Discuss the best reason(s) for using the allowance method and give some examples of companies that are likely to use that method. Also explain why it would ever be appropriate to use the direct write-off method, especially since it is not GAAP.
When a large account receivable balance is due from one client it is logical to use the direct write-off method to adjust the bad debt expense and accounts receivable balance. Under different circumstances, another method is used called the allowance method. Discuss the best reason(s) for using the allowance method and give some examples of companies that are likely to use that method. Also explain why it would ever be appropriate to use the direct write-off method, especially since it is not GAA
1. Which of the following is the primary reason why a company sells it receivables to another entity? a) to improve the quality of its credit granting process b) to comply with customer agreements c) to limit its legal ability d) to accelerate access to amount collected
As long as a company accurately records credit sales information, it is not necessary to have accounts for specific customers. True or false
Public companies are required to use the Allowance Method to account for uncollectible Accounts Receivable. From an investor's perspective, why is this beneficial? How does the Allowance Method allow for better financial statement analysis as compared to the Direct Write-off Method?
Once an accounts receivable is written off does the company still pursue collection or is the receivable removed from the books or does the company expect to be paid or the account must be turned over to a collection agency?
1. When using the Allowance method to account for uncollectible accounts, between the income statement approach and the balance sheet approach, which is more accurate in your opinion? Fully support your answer with sound research. 2. Can the Allowance account be used to misinterpret a company's financial results? How so? Provide at least one example of how a company might accomplish this. 3. Suppose a company accepts a Note Receivable in lieu of an Accounts Receivable. How would the company record this transaction? Provide an example and related journal entry. (You may not use the examples from the textbook.)
Companies sometimes convert receivables to cash before they are due by selling them or using them as security for a loan. The reasons that a company may convert receivables before their due date include: (Check all that apply.) to quickly increase profit. the company needs cash. the company does not want to deal with collecting receivables. to satisfy customer's needs.
Why does Target not report any accounts receivable, even though they have a Target brand credit card?
What is the primary reason why most businesses want to sell on a credit basis if it is preferable for sellers to collect advance payments from customers and/or accept cash transactions only? Give and explain a credit/collection-related task of (a) credit manager and (b) collections manager.