Considering that the credit policy of Steward (Pty) Ltd is 90 days, which one of the following statements is true when analysing the debtor’s collection period?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Considering that the credit policy of Steward (Pty) Ltd is 90 days, which one of the following statements is true when analysing the debtor’s collection period?
A. The debtor’s collection period improved from 2020 to 2021, and the company is still collecting debtors within their credit policy terms of 90 days.
B. The debtor’s collection period improved from 2020 to 2021, which is also good for the
C. The debtor’s collection period worsened from 2020 to 2021, and the company is not collecting debtors within their credit policy terms of 90 days.
D. The debtor’s collection period worsened from 2020 to 2021, but debtor’s are collected within their credit policy terms of 90 days.
E. The debtor’s collection period remained constant from 2020 to 2021.
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