What types of receivables are there? What internal controls could be in place to protect receivables...

What types of receivables are there? What internal controls could be in place to protect receivables management?
Please no handwritten answers. I need to be able to read the answer.

Expert Solution

Receivables are majorly classified into the following types are:

a. Accounts Receivable: Also referred to as Debtors or Trade Receivables, this type of Receivable is against Goods sold or services rendered by the enterprise and payable by the customers to the company.

b. Notes Receivable: These are legal promissory notes or Bills Receivable signed by Receivables in favour of our company. They strenghten the claims against those receivable which turn bad or do not pay.

c. Other Receivables: These are receivables such as Interest Receivables, Salary or Wage Advances, other Loans and Advances etc.

Internal Controls that could be in place to Protect Receivables Management are:

a. Ageing Analysis: Ageing Analysis could give clear picture about Receivables which have become due since long and company is unable to recover the same. Critical Receivables which have not been recovered for 1 year or more should be recovered immediately or legal steps taken to recover the same.

b. Establish Credit Policy: Credit Period shall be clearly defined for different types of receivables. Strict steps shall be taken to recover receivables within the Credit Period alloted

c. Regular Tracking of payments relating to doubtful receivables.

d. Charging of Interest on Overdue Receivables as per agreement terms.

e. Segregation of Duties relating to various Receivables Management tasks.

f. Provision for Doubtful Debts: Such a provision could save the company from any sudden shock relating to receivables turning bad.

ekkarill92 answered 2 years ago

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