Asked by Jeanette Abreu on Jul 19, 2024
Verified
As a firm increases the amount spent on the collection of overdue accounts, both the average collection period and the percentage of bad debts decline.
Collection Period
The average number of days it takes for a company to collect payments owed by its customers.
Bad Debts
Money owed to a company that is unlikely to be paid by the debtor, often resulting in a write-off for the company.
- Comprehend the consequences of credit policy on bad debts and the performance of accounts receivable (ACP).
Verified Answer
LK
Logan KetchumJul 22, 2024
Final Answer :
True
Explanation :
Increasing the amount spent on the collection of overdue accounts improves the efficiency of the collection process, resulting in a shorter average collection period and a lower percentage of bad debts.
Learning Objectives
- Comprehend the consequences of credit policy on bad debts and the performance of accounts receivable (ACP).