RECEIVABLES

Question 1

OBJECTIVES IN PROVIDING INFORMATION ON RECEIVABLES

Answer 1

The main user to make decision making about the entities that are their business.

Can assess their efficiency and liquidity in managing information about receivables.

With that cash cycle (efficiently and effectively) business can void insufficient cash for business

Question 2

SIZE RECEIVABLES AFFECTED BY:

Answer 2

1. INDUSTRY
2. NATURE OF BUSINESS
3. LEVEL OF SALES MADE
4. CREDIT PROCESS
5. WHETHER IT EXTENDS LONG-TERM FINANCING
6. TIME OF THE YEAR

Question 3

BENEFITS OF OFFERING CREDIT TO CUSTOMERS

Answer 3

1. INCREASE IN SALES
2. BETTER CUSTOMER LOYALTY
3. MEET THE COMPETITION

Question 4

THE MEANING BY INCREASE IN SALES

Answer 4

CUSTOMERS USUALLY WILL BUY FROM A COMPANY THAT OFFER CREDIT TERMS INSTEAD OF HAVING TO PAY CASH

Question 5

THE MEANING BY BETTER CUSTOMER LOYALTY

Answer 5

AT THE FIRST PLACE OUR COMPANY/ ENTITY HAVE THE RESPECT AND TRUST TO OUR CUSTOMERS

WITH THAT, OUR CUSTOMERS WILL PAYBACK OR REWARDS PUR COMP BY CONTINUING TO BUY FROM OUR COMPANY

Question 6

THE MEANING BY MEETING COMPETITION

Answer 6

ex, when there are comp A and B, both of these companies offer credit terms to their customers but comp A decided to offer discounts

meaning that they offer more favorable terms to their customers so with that many people will buy from company A

Question 7

COST OF OFFERING CREDIT TO CUSTOMERS

Answer 7

1. ADDITIONAL ADMINISTRATION COSTS
2. LOSS OPPORTUNITY AS CASH IS TIED UP WITH DEBTORS
3. KEEPING UP WITH ACCOUNTS RECEIVABLES
4. LATE PAYMENTS RESULTS IN REDUCE CASH FLOW
5. POTENTIAL OF BAD DEBTS

Question 8

THE MEANING BY ADDITIONAL ADMINISTRATION COST

Answer 8

THE CREDIT PURCHASE OF EACH customer MUST BE INVESTIGATED BY ADMIN IN THE BUSINESS

SO THIS WILL INCREASE SOME COST

Question 9

LOSS OF OPPORTUNITY AS CASH AS TIED UP WITH DEBTORS

Answer 9

CASH FLOW WILL BE AFFECTED WHEN THERE IS LATE PAYMENT OR HUTANG YANG CANNOT COLLECT.

THIS CAN IMPACT THE FUNDING THAT THE BUSINESS REQUIRED AND WILL AFFECT THE GROWTH PLANS THAT THEY ALREADY PLANNED B4

Question 10

KEEPING UP WITH ACCOUNTS RECEIVABLE

Answer 10

BUSINESS/ ENTITY NEED TO KEEP UP WITH THE STATUS ACCOUNT RECEIVABLES AND MUST HAVE THE EFFICIENT REMINDER TO DEAL WITH OVERDUE ACCOUNT

Question 11

LATE PAYMENTS RESULTS IN REDUCE CASH FLOW

Answer 11

THIS CAN PUT A BUSINESS TO RISK DUE TO LATE PAYMENTS AND THEY ARE NOT GOING TO HAVE ANY FUND TO FINANCE THEIR OPERATION IN DAILY ROUTINE

Question 12

POTENTIAL OF BAD DEBTS

Answer 12

THERE A RISK WHEN OFFERING A BAD DEBT DUE TO

CANNOT COLLECT THE DEBTS FROM THE CUSTOMER

Question 13

WHAT IS BAD DEBTS

Answer 13

Bad debts expense is related to a company’s current asset accounts receivable. Bad debt expense is also referred to as uncollectible accounts expense or doubtful accounts expense.

Question 14

HOW TO MANAGE RECEIVABLES

Answer 14

UNCOLLECTIBLE DEBTS (BAD DEBTS) CAN DECREASE PROFITS, IT IS IMPORTANT TO ENTITY TO MANAGE THEIR RECEIVABLES EFFICIENTLY

THAT IS GOOD CREDIT CONTROL

Question 15

2 TOOLS, HOW TO MANAGE RECEIVABLES

Answer 15

1. SETTING CREDIT LIMIT - MAX AMOUNT OF CREDIT TERMS THAT WE PUT TO CUSTOMERS

EX, COMPANY A OFFER CREDIT TERMS AMOUNTING ONLY RM5000 TU THEIR CUSTOMER AND CANNOT MORE THAN THAT

2. CREDIT MONITORING THROUGH PREPARING AGING REPORT OF TRADE RECEIVABLES (AGING ANALYSIS)
   - THIS AGING REPORT PROVIDES COMPETE INFOS LIKE THE AMOUNTS THAT CUSTOMER OWED/ OUTSTANDING AMOUNTS

Question 16

THE BENEFIT BY ACCOUNTS RECEIVABLE AGING REPORTS

Answer 16

1. ENTITY HAS THE REGULAR CONTACT WITH THE CUSTOMER LIKE TELLING THM THEY ARE LATE TO DO THE PAYMENT AND SO ON
2. THE ABILITY THAT THE ENTITY HAS TO DECIDE WHETHER TO SEVER/ CUT OFF TIES WITH THE CUSTOMERS WHO STRUGGLES TO PAY IN TIME
3. ENTITY CAN MAKE THE DECISION IN STOP PROVIDING GOODS OR SERVICES TO CUSTOMER THAT UNABLE TO PAY DEBTS/ B4 LATE PAYMENT BECAME AN ISSUE TO THE ENTITY

Question 17

WHEN TO RECOGNISE FINANCIAL INSTRUMENTS (FA&FL)

Answer 17

A FA OR FL IS RECOGNISED IN THE STATEMENTS OF FINANCIAL POSITION WHEN “ENTITY BECOMES A PARTY OF THE CONTRACTUAL PROVISIONS”

Question 18

HOW SHOULD RECEIVABLES report IN THE FINANCIAL STATEMENTS?

Answer 18

RECEIVABLES ARE REPORTED AS AN “ASSETS” IN THE SOFP THAT FIT THE DEFINITION “ASSETS AND RECOGNITION CRITERIA”

Question 19

DEFINITIONS OF ASSET

Answer 19

1. RECEIVABLES HAS ARISEN DUE TO DELIVERY GOODS ( PAST EVENTS)
2. THE DEBTS IS CONTROLLED BY THE BUSINESS
   (BUSINESS HAS THE LEGAL RIGHT TO DEMAND PAYMENT ON DUE DATE & WOULD LOSE MONEY IF THERE IS NO PAYMENT ) - RISK
3. CASH PAYMENT MADE ON DUE DATE THAT WILL LEAD TO CASH INFLOW OF ECONOMIC BENEFIT

Question 20

RECOGNITION OF CRITERIA

Answer 20

1. RELEVANT

2. FAITHFUL REPRESENTATION