How will u handle accounts receivable?
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Answer Posted / vikrant
Debtors management is not an easy task. Is it that easy to
answer the question How will u handle Accounts Receivable?
with only explanation of Accounting Treatment?
First of all in Question it is not mentioned whether u
relate to creation of Accounts Rceivable (Invoicing) or
Receipt of payment from Customer or Ageing Analysis (MIS)
or Audit part or Providing for bad Debts and Provisions
thereof or mentioning Sticky O/s , major Debtors in Audit
Reports or Variance Analysis wrt individual amts. of Debtor
over the year.
You may specify what of the above is required to be
answered in your quetion, in absense of the same i am
giving General Accounting Treatment which is of basic
level, just to understand the funda.First of all Most of
the people know here that after raising a bill / Invoice
the same is shown as Current Asset in balance sheet. (I am
giving Just an example)
Debtors' A/c Dr.
To Sales A/c
On Collection u take Bank/Cash receipt as the case may be
Bank A/c Dr.
To Debtor's A/c
The period between Raising of Invoice (Accruing Sales)
and Realisation (Collection of payment) is the one which is
called Credit period given to our Customers(voluntarily or
involuntarily :-)) and the Quantom is reflected by the term
Debtors(In Total for Balancesheet and
Customerwise,Periodwise in Debtor's Ageing etc.)
The key to managing debtors in short (AFAIK) is below
points.
1) Pass Invoicing entries accurately in Customer Ledger.
2) Collection entries to be passed accurately(customerwise
especially)
3) Ageing Analysis to be calculated periodically.
4) Sticky O/s to be given special attention.
5) Provide for sticky O/s in Books
6) Write off Bad Debts for Unrealisable o/s
7) Debtor's confirmation for Balances to be taken as part
of Statutory Audit or voluntarily as the case may be.
This was just some of many points, in case i have forgotten
something very important, pl. reply by suggestions.
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