Cost & Financial Accounting Bonus Session

Credit Sale – Agreed to be paid later (By the customer)

In the case the customer cannot pay – (ex. Wages/difficult month) It is considered a loss for the
business. (In case payment was still not received – send legal notices, deadlines – Otherwise if that
still does not bear results, send in a lawyer – If that is still not efficient, court case).

- Recognize Losses as soon as reasonably possible / foreseeable

Issue of Uncollectables/Bad Debts

Issue of Creating a reserve for Uncollectables / Provision of doubtful Debts

2 Ways/Methods How much the reserve for doubtful debts should be

- Estimating based on percentage of sales – (Assume 1% of the estimated sales as

uncollectable ex. Out of 300000 – 3000 is uncollectable.)
- Allowance Method – “Aged” Analysis

Uncollectible percentage

How would we declare the bad debt ?

What is a doubtful debt? How can We Manage it? (ex. Debt Collection)

What kind of ratios do we need?

- Asset ratios
- Debt Management Ratios
- Etc.

In order to get learn the ratios we have to “Understand” the interrelationships between the factors
on the income statement/balance sheet/etc. Ratios that describe or tell us about the operating
reality of the business.

120 Minutes – 3 Multi-part questions – Some questions are simpler/easier

Exam Carries a maximum of 30 points – 30 / 3 Multi-part questions = 10 Points per MQ.

FIFO / LIFO

(NRV) – Net realizable value – Declared on balance sheet

Questions that are less descriptive – “figure out the questions on our own”

More descriptive questions – act as a “guide” on how the answer should be structured.

A lot of “debt” related questions for the exam

If he gives us 5 questions – do 4 Questions out of 5