If One of Your Firm's Customers Is "Stretching" Its Accounts

question 44

True/False

If one of your firm's customers is "stretching" its accounts payable, this may be a nuisance but it does not represent a real financial cost to your firm as long as the customer periodically pays off its entire balance.

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Definitions:

Supplemental Ledger

Supplemental ledger is an accounting ledger used for keeping detailed information that supports figures stated in the general ledger, providing additional details or breakdowns.

Primary Ledger

The main accounting record used by a business to keep track of all the financial transactions.

Accounts Receivable Subsidiary Ledger

A detailed record showing the individual transactions and balances for customers who owe the company money, supporting the summary balances shown in the general ledger.

Controlling Account

An account in the general ledger that summarizes the total balances of all individual accounts in a subsidiary ledger.