EHEP000219-1 - 2918T_c08_384-431.qxd 8/27/08 10:06 PM Page...

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study objectives After studying this chapter, you should be able to: 1 Identify the different types of receivables. 2 Explain how accounts receivable are recognized in the accounts. 3 Describe the methods used to account for bad debts. 4 Compute the interest on notes receivable. 5 Describe the entries to record the disposition of notes receivable. 6 Explain the statement presentation of receivables. 7 Describe the principles of sound accounts receivable management. 8 Identify ratios to analyze a company’s receivables. 9 Describe methods to accelerate the receipt of cash from receivables. chapter Reporting and Analyzing Receivables 384 8 the navigator Scan Study Objectives Read Feature Story Preview Text and Answer p. 394 p. 398 p. 403 p. 407 Work Using the Decision Toolkit Review Summary of Study Objectives Comprehensive p. 410 Answer Self-Study Questions Complete Assignments Do it! Do it! 2918T_c08_384-431.qxd 8/27/08 10:06 PM Page 384
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“Sometimes you have to know when to be very tough, and sometimes you can give them a bit of a break,” says Vivi Su. She’s not talking about her children, but about the customers of a subsidiary of pharmaceutical company Whitehall-Robins , where she works as supervisor of credit and collections. For example, while the company’s regular terms are 1/15, n/30 (1% discount if paid within 15 days), a customer might ask for and receive a few days of grace and still get the discount. Or a customer might place orders above its credit limit, in which case, depending on its payment history and the circumstances, Ms. Su might authorize shipment of the goods anyway. “It’s not about drawing a line in the sand, and that’s all,” she explains. “You want a good relationship with your customers—but you also need to bring in the money.” “The money,” in Whitehall-Robins’s case amounts to some $170 million in sales a year. Nearly all of it comes in through the credit accounts Ms. Su manages. The process starts with the decision to grant a customer an account in the first place, Ms. Su explains. The sales rep gives the customer a credit application. “My department reviews this application very carefully; a customer needs to supply three good references, and we also run a check with a credit firm like Equifax . If we accept them, then based on their size and history, we assign a credit limit.” Once accounts are established, the company supervises them very carefully. “I get an aging report every single day,” says Ms. Su. “The rule of thumb is that we should always have at least 85% of receivables current—meaning they were billed less than 30 days ago,” she continues. “But we try to do even better than that—I like to see 90%.” Similarly, her guideline is never to have more than 5% of receivables at over 90 days. But long before that figure is reached, “we jump on it,” she says firmly.
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This note was uploaded on 01/20/2012 for the course ACCOUNTING 101 taught by Professor Dubai during the Spring '11 term at Abu Dhabi University.

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