Account Receivable Credit Line

Re phrase the question!

I think you are asking if you should borrow from a line of credit to buy a portfolio of factored invoices(accounts receivables)?

2006-03-14 12:47:16 by Jose

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The method most used by business to account for bad debts related to accounts receivable is called?

A-Percentage of Credit Sales
B-Estimated Bad debts
C-Aging of Accounting receivable
D-Direct Write-off
E-Straight line write off

C-Aging of Accounts receivable

2009-03-15 22:01:41 by Tim O

I have a customer whose a constant pain in the a - s - s. Anyway, my company extends him a small credit line and his invoices are due within 20 days from the invoice date (we call this "net 20 terms"). Anyway, I think this customer just likes being a pest.

Here's what he asked today:

“Gerry, I need to talk to your Credit Department. As you can see our sales with you have increased, so with our 20 day terms, and giving you on an average of 1 to 3 orders day, we will have an invoice due you every single day of the week.

I could send you a check every single day, but that is ridiculous don’t you think. I need to speak with them about this and try to get on a better payment plan.

I will be home Thursday all day.

Steven”


***************

Here’s the thing…all of our other customers are also on net 20 terms…however they have a payment routine set up (like some of our customers will send a payment every week or something). None of our other customers have ever said what he just said. Our company is trying to enforce our 1.5% monthly late fee for all past due invoices and that is probably why he contacted us. Anyway, I responded to the customer and I told him this:

“Steven,

I think it would be a little unreasonable if we asked you to send a payment everyday. If you want to send a check every week or every two weeks that would be fine. Actually, a payment routine like that I think would work out good for you…many of our customers usually process payments on a weekly or bi-weekly basis.

If you pay weekly, that’s 4 checks per month. If you send payment every 2 wks, that’s 2 payments per month. Even if they arrive after the due date you won’t be charged any late fees.

Let me know.

Thanks,

Gerry”


***********
This customer only places like 3 orders a day. He acts like he’s our biggest customer. He’s a peanut account. I could drop his account if I wanted to, but I won’t do it right now because he owes a little money, but not much. Once I get his account today a zero balance, I probably should tell him that we are done with him. I don’t know what to do. What do the rest of you think?
* correction above

Once i get his account to a zero balance i wil probably tell him that we are no longer interested in doing business with him.

You have no idea how lucky you are. I own a manufacturing company and the bulk of our customers are now paying at 90 plus days out. (terms are 1%-10, Net 30).

We would be pricks to them, but manufacturing is dying and if we don't help each other stay open, the government and banks are too happy to close us down.

So, a paying customer that does multiple orders a day is a pain in the butt? Wish I had your troubles.

Good luck

2009-02-25 19:55:03 by Gerry

Assets= Liabilities + Shareholder's(Owner's)equity
1-Payment of cash divedents
2-Payment of creditors
3- Payment of expenses not yet incured
4- Charge depreciation on straight line method
5- Collection of account receivable
6- Purchase of an asset on credit
7- Withdrawl of full credit from Partnership business
8- Creating provision for bad debits
9- Begin the business by depositing some amount in company's Bank Account
10- Issue new share previously authorized but not issued.

kind of a weird question, but here goes.

1. reduces assets reduces owners equity
2. reduces assets reduces liabilities
3. increases assets decreases assets
4. decreases assets decreases owners equity
5. no impact
6. increases assets increases liabilities
7. decreases assets decreases owner's equity
8. decreases owners equity decreases assets
9. increases owners equity increases assets
10. increases assets increases owners equity

2008-06-23 00:12:30 by moon niazi

True Or False

1.When companies sell their receivables to other companies, the transaction is called factoring.

2.Allowance for Doubtful Accounts is a liability account.

3.When an accounts receivable that has been written off is subsequently collected, the account receivable is reinstated.

4.The accounts receivable turnover measures the length of time in days it takes to collect a receivable

5.During inflationary periods, the use of FIFO method of costing inventory will yield an inventory amount for the balance sheet approximating the current replacement cost.

6.Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand.

7.When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods sold.

8.A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor.

9.Generally, the lower the number of days’ sales in inventory, the better

10.One negative effect of carrying too much inventory is risk that customers will change their buying habits.

11.In the retail inventory method, the cost to retail ratio is equal to the cost of goods sold divided by the retail price of the good sold.

12.Generally, all deductions made from an employee’s gross pay are required by law.

13.All long-term liabilities eventually become current liabilities.

14.In order to be a recorded contingent liability, the liability must be possible and easily estimated.

15.Receiving payment prior to delivering goods or services causes a current liability to be incurred.


Multiple Choice

1.The internal control objective most relevant to receivables is
a.Safeguard assets
b.Comply with laws and regulations
c.Operate efficiently
d.Assess risk

2.The two methods of accounting for uncollectible receivables are the allowance method and the
a.Equity method
b.Direct write off method
c.Interest method
d.Cost method

3.What is the type of account and normal balance of Allowance for Doubtful Accounts?

a.contra asset, credit
b.asset, debit
c.asset, credit
d.contra asset, debit

4.A 60-day, 10% note for $8,000, dated April 15, is received from a customer on account. The face value of the note is
a.$8,600
b.$7,200
c.$8,800
d.$8,000

5.If the merchandise costs $4,000, insurance in transit costs $200, tariff costs $50, processing the purchase order by the purchasing dept costs $35, and the company receiving dock personnel cost $15, what is the total cost charged to the merchandise?
a.$4,250
b.$4,285
c.$4,300
d.$4,000

6.If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
a.N/30
b.FOB shipping point
c.FOB destination
d.Consigned

7.Under which method of inventory costs flows is the cost flow assumed to be in the reverse order in which the expenditure were made?
a.Weighted average
b.Last-in, first-out
c.First-in, first-out
d.Average cost

8.Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?
a.Owners equity is overstated
b.Cost of merchandise sold is overstated
c.Gross profit is understated
d.Net income is understated

9.A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $2,000, would have a cost basis of
a.$92,000
b.$91,000
c.$87,000
d.$86,000

10.Equipment with a cost of $160,000 has an estimated residual value of $10,m000 and an estimated life of 5 years of 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was 3,300 hours?
a.$30,000
b.$32,500
c.$34,000
d.$40,000

11.In a normal arm’s length business transaction, long-term liabilities are often secured by
a.Fixed assets
b.Signature of the chief executive officer
c.Accounts receivable
d.Bonds payable


12.The maturity value of a $40,000, 90 day, 6% note payable is
a.$40,600
b.$42,400
c.$600
d.$2,400

13.Most employers are required to withhold from employees which of the following employment taxes?
a.FICA tax
b.FICA tax, state and federal unemployment compensation tax
c.Only state unemployment compensation tax
d.Only federal unemployment compensation tax


14.The cost of a product warranty should be included as an expense in the
a.Period the cash is collected for a product sold on account
b.Future period when the cost of repairing the product is paid
c.Period of the sale of the product
d.Future period when the product is repaired or replaced

15.Payroll taxes levied against employees become liabilities
a.The first of the following month
b.At the

1. TRUE
2. FALSE. It's a contra asset account.
3. TRUE
4. FALSE. It's the number of times in an operating cycle (normally one year) the company collects its receivable balance
5. TRUE
6. FALSE
7. FALSE
8. TRUE
9. FALSE
10. TRUE
11. TRUE
12. TRUE
13. TRUE
14. FALSE. It must be probable and easily estimated.
15. TRUE

Multiple Choice

1. d. Assess risk
2. b. Direct write off method
3. a. contra asset, credit
4. d. $8,000
5. a. $4,250
6. b. FOB shipping point
7. b. Last-in, first-out
8. a. Owners equity is overstated
9. a. $92,000
10. a. $30,000
11. a. Fixed assets
12. a. $40,600
13. a. FICA tax
14. c. Period of the sale of the product

2009-06-28 18:28:22 by G-man55