A Firm That Has an Average Age of Accounts Receivable

question 19

Multiple Choice

A firm that has an average age of accounts receivable that is significantly lower than the industry average:

• A)may have higher credit standards and offer credit to only the most highly qualified customers.
• B)may have credit terms that allow fewer days to pay before beginning to charge interest.
• C)may offer a larger discount than the industry average to encourage customers to pay early.
• D)All of the above.

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Definitions:

Debit Side

The left side of an account in double-entry bookkeeping, used to record increases in assets, expenses, and losses or decreases in liabilities, equity, and revenue.

Overapplied Overhead

Occurs when the overhead allocated to products or services exceeds the actual overhead costs incurred.

Australian Accounting Standards

The set of principles and requirements that guide financial reporting and accounting practices in Australia, ensuring consistency and transparency.

Market Value

The current price at which an asset or service can be bought or sold in the open market.