1. What is accounts receivable
Accounts receivable Accounts receivable Payment refers to the amount of money that an enterprise should collect from the purchasing unit for selling goods, products, providing labor services and other businesses in the normal course of business operations, including taxes that should be borne by the purchasing unit or the unit that accepts labor services, and various transportation charges advanced on behalf of the purchaser. Miscellaneous expenses, etc.
Accounts receivable is a creditor's right formed along with the company's sales behavior. Therefore, the recognition of accounts receivable is closely related to the recognition of revenue. Accounts receivable are usually recognized at the same time as revenue is recognized. This account sets up detailed accounts for detailed accounting according to different units that purchase goods or receive services.
Accounts receivable represent the funds occupied by the purchased units during the sales process of the enterprise. Enterprises should collect accounts receivable in a timely manner to make up for the various expenses incurred by the enterprise in the production and operation process and ensure the company's continued operations; measures should be taken for accounts receivable that are in arrears and organize collection; for accounts receivable that cannot be collected, , whoever meets the conditions for bad debts should deal with bad debt losses after obtaining relevant certificates and submitting them for approval in accordance with the prescribed procedures.
2. What is the most important substantive procedure for reviewing accounts receivable
The main substantive procedures for reviewing accounts receivable:
1. Obtain or prepare a detailed list of accounts receivable;
2. Analysis procedures - check relevant financial indicators involving accounts receivable;
3. Analyze account aging;
4. Confirm the accounts receivable to the debtor;
5. Confirm the collected receivables Account amount;
6. Implement alternative audit procedures for accounts receivable that have not been confirmed;
7. Check the confirmation and processing of bad debts;8. Check whether there are any claims that are not settlement business;
9. Check the discount, pledge or sale of accounts receivable;
10. Implement association of accounts receivable Procedures for auditing parties and their transactions;
11. Determine whether the presentation of accounts receivable is appropriate.
The most important substantive procedure is to confirm accounts receivable to the debtor.
3. Reasons for accounts receivable
First Type:
There are two main reasons for accounts receivable:
First ,business competition. This is the main reason for accounts receivable. Under the conditions of the socialist market economy, there is fierce business competition. The role of the competition mechanism forces companies to expand sales by various means. In addition to relying on product quality, price, after-sales service, advertising, etc., credit sales are also one of the means to expand sales. For the same product price, similar quality level, and the same after-sales service, the sales volume of products or commodities sold on credit will be greater than the sales volume of products or commodities sold in cash. This is because customers will benefit from selling on credit. Due to the competitive need to expand sales, companies have to attract customers through credit sales or other preferential methods, thus generating accounts receivable. Accounts receivable arising from competition is a type of commercial credit.
Second, there is the time difference between sales and payment collection. The time when goods are sold and the time when payment is received are often inconsistent, which also leads to accounts receivable. Of course, cash sales are very common in real life, especially in retail companies. However, for general wholesale and mass production companies, the time of delivery and the time of receipt of payment are often different. This is because payment settlement takes time. The more backward the settlement method is, the longer the settlement time will be. Sales companies can only admit this reality and bear the capital advances caused by it. Accounts receivable due to the time difference between sales and collection do not belong to commercial credit, nor are they the main content of accounts receivable.
The second type
Causes enterprises toThe reasons for the high level of bill collection can be summarized from two aspects. On the one hand, due to the fierce market competition, in order to expand sales and increase the competitiveness of the company, these factors often force companies to use credit sales to win customers and expand market share, and many companies deliberately default on their accounts. The market credit system is not perfect.
On the other hand, it is due to the company's own problems. Subjectively, corporate managers generally only focus on sales and ignore internal management, including accounts receivable management. Objectively, they lack both experience and theory in accounts receivable management.
Market competition is becoming increasingly fierce. In order to expand sales, companies have increased their competitiveness, which is an important reason for the formation of accounts receivable. Sales on credit itself are risky, and this credit sales risk is the cause of the company's accounts receivable risk.
Risks of credit sales
Credit sales actually extend the time span for converting corporate products into cash , corporate capital turnover slowed down and operating costs increased. As the time span lengthens, the probability of bad debts increases, and the risk of the company being unable to recover its accounts becomes greater. The longer the time span, the greater the risk. Only by formulating effective protection measures in advance can business managers ensure that mistakes and risks are minimized. This means having a certain degree of confidence in customers' credit. Therefore, corporate credit management is the only basis for the corporate sales department to issue credit to customers. If the customer's credit is evaluated to be poor, the company should not sell on credit.
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