The Effective Management of Accounts Receivable Requires Financial Managers to

question 77

Multiple Choice

The effective management of accounts receivable requires financial managers to

• A) review the credit history of new customers.
• B) provide prompt cash payments to suppliers.
• C) allow customers more time in paying their past due accounts.
• D) refuse bank-issued credit cards.

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Definitions:

Aging Method

A technique used in accounting to estimate uncollectible accounts receivable by categorizing them based on the length of time they have been outstanding.

Allowance for Doubtful Accounts

A contra-asset account used to reduce the total receivables reported to reflect only the amounts expected to be collected.

Bad Debts Expense

Bad debts expense represents the loss that a company anticipates or realizes from customers who are unable to pay their outstanding balances.

Uncollectible Accounts

Refers to receivables that a business has determined are unlikely to be collected due to customer default.