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Lesson 5.4 Credit Sales and Receivables Flashcards | StudBud
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Lesson 5.4 Credit Sales and Receivables
Lesson 5.4 Credit Sales and Receivables
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1
Credit Terms
The conditions under which credit is extended by a lender to a borrower.
The conditions under which credit is extended by a borrower to the lender.
2
1. Capacity
The ability of the borrower to repay money owed is known as capacity.
The ability of the borrower to buy an item.
3
Aging of Accounts Receivable
Based on how long the AP has been due.
Based on how long the AR have been due.
4
More Elements
of Credit Terms
No delivery chargers EVER, pay when you want.
Buyer or seller pay delivery charges, number of days to pay.
5
Categories of Aging Accounts Receivable
Current and Future purchases.
Current, 30 days overdue, 31-60 days overdue and over 61 days.
6
Secured Loans
use assets such as ...
stocks, bonds, real estate, vehicles
coffee mug, socks, notebooks
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n/30 or n/60
Half of the amount is due in 30 or 60 days.
The full amount due in 30 or 60 days.
8
Credit Conditions
The ability now to begin to purchase an item.
The ability to begin to sell an item.
9
3. Past Credit History
Use the credit rating of the borrower.
Use the credit history of the seller.
10
Uncollectible
Accounts
Not collected, these bad debts become part of the expenses to the company.
Not collected, these bad debts become part of the income to the company.
11
What does the term
Credit Policy
mean?
The guidelines set for approval of credit customers who can buy on account.
Who can buy on account using their good looks.
12
Elements
of the Credit Term
No penalty at all!
Penalty or interest for late payments, discounts for early payment.
13
2. Collateral
A specific asset is used to secure a loan.
A article of clothing used to pay a loan.
14
Unsecured Loans
A credit situation that doesn't have an alarm system.
A credit situation which have no specific collateral.
15
Receivable Management
A purchase is made, an invoice is sent, and accounts receivable is created.
A purchase is made, an invoice is sent, an accounts payable is created.
16
Credit Terms
Expressed as 2/10, n/30(n/60)
Expressed as 2/10, n/100.
17
Three
main factors apply when a business decides who will be allowed to buy on credit. What are they?
Capacity, Unsecured Loans, ELA
Capacity, Unsecured Loans, History
18
Debt Collection Customer Protection
No calls b/4 8am or after 9pm, can't call debtor at work, don't tell anyone
Call anytime and any place and tell anyone
19
2/10
2 percent discount offered to the customer if paid in 10 days.
2 percent discount offered to the customer if paid in 10 years.
20
Debt Collection
Contact debtor, strong reminder, legal action.
Contact debtor, no reminders, no legal action.
21
Lesson 5.4
Credit Sales and Receivables
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