Question

A company might increase collections on accounts receivable by doing all of the following except:

writing off accounts receivable.

offering discounts for prompt payment.

imposing strict requirements for the granting of credit

charging interest on unpaid balances.

Answer 1

Correct Answer:

Option(1) or writing off accounts receivable is correct answer because by writing off accounts receivable will not increase the collection from account receivable,but it decreases. Writing off accounts receivable is an expenses to the firm.

Incorrect Answers:

Option (2) or offering discounts for prompt payment is incorrect answer because by giving the discount for prompt payment the customer will pay early to take the advantage of discount and save the money.So collection from account receivable will increase.

Option (3) or imposing strict requirements for the granting of credit is incorrect answer because if there is a strick rule for for the granting of credit, then the customers will make the payment earlier to avoid any action for delay payment.So collection from account receivable will increase.

Option (4) or charging interest on unpaid balances is incorrect answer because by charging interest on unpaid balances customers will make the payment early to avoid the interest payment.So collection from account receivable will increase.

So correct answer is option(a)