Accounts Receivable and Credit Control Assignment -
Question 1: Some businesses sell their goods on credit to customers. However, these customers do not pay on time or do not pay at all. State 3 steps businesses can take to receive early payments from customers.
Question 2: 'Control over receivables is not quite as important as control over cash.' Discuss.
Question 3: Accounts Receivable Internal Control
The bookkeeper of a small but growing bread company prepared bills to be sent to customers and was responsible for collecting payments. Sales were growing through the acquisition of new customers and increasing sales to existing ones. A surprise internal audit revealed, however, that bank deposits were not as large as would have been expected considering the rate of sales growth. An examination of customer copies of sales invoices revealed that the amounts being billed were higher than the amounts being recorded in the cash receipts journal for the same transaction. Office copies of the invoices had been altered to reflect the falsified journal entry. The bookkeeper had stolen more than $15,000 over a period of a year before the fraud was discovered. The bookkeeper was dismissed and agreed to repay the money in order to avoid having the matter brought to the attention of the police.
Required:
1) State and explain two possible internal control weaknesses that were present in the case study.
2) Suggest and explain three internal control procedures that can help minimize or prevent the risk of fraud in accounts receivable.
Question 4: Bad and Doubtful Debts
Susan's Agriculture Supplies Ltd uses the net credit sales method for estimating doubtful debts. It is estimated that 2% will be uncollectable. You have been provided with the following information. Ignore GST.
June 1 Balance in the Allowance for Doubtful Debts account is $2100.
June 5 After concerted effort to collect, an accounts receivable of $1125 for Susan was written off as a bad debt.
June 15 Susan unexpectedly paid $875 of the amount of her debt written off on 5 June.
June 30 An appropriate adjusting entry is made to the allowance for doubtful debts. Sales for the year ending 30 June were $800,000, 25% of which are for cash.
Required
A. Record the above transactions in general journal.
B. What is the balance in the Allowance for Doubtful Debts account and the Bad Debts Recovered account? Where are these accounts shown on the financial statements?
C. Prepare extracts of the income statement and balance sheet to show the accounts that would exist.
Question 5: Bills Receivable
Journalize the following transactions
September 12 received a $30,000, 12%, 120-day note on account.
October 9th received a $15,000, 10%, 60-day note on account.
November 15th received an $18,000, 15%, 30-day note on account.
8th December received the amount due on the note of October 9.
15th December the note of November 15 was dishonored.
31st December accrued interest on the note of September 12.