Scribd
Upload
520 views2 pages

General Ledger Would Always Be Current After Every Transaction But The Operating Efficiency May Be Affected Depending On The Size of The Company and The Number of Transactions That Are Processed

The document discusses how an inconsistently applied or poor credit policy can lead to financial statement misrepresentation. Specifically, it states that accounts receivable may be overstated if the allowance for doubtful accounts is understated as a result of a company having a poor or inconsistent credit policy. Additionally, bad debt expense may be understated due to an inconsistently applied credit policy. A consistent, well-written credit policy is important for risk management and determining financial statement amounts like allowance for doubtful accounts.

Uploaded by

Raca Desu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
520 views2 pages

General Ledger Would Always Be Current After Every Transaction But The Operating Efficiency May Be Affected Depending On The Size of The Company and The Number of Transactions That Are Processed

The document discusses how an inconsistently applied or poor credit policy can lead to financial statement misrepresentation. Specifically, it states that accounts receivable may be overstated if the allowance for doubtful accounts is understated as a result of a company having a poor or inconsistent credit policy. Additionally, bad debt expense may be understated due to an inconsistently applied credit policy. A consistent, well-written credit policy is important for risk management and determining financial statement amounts like allowance for doubtful accounts.

Uploaded by

Raca Desu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

9.

The accounts receivable being overstated is one of the financial statement misrepresentation
that may result from an inconsistently applied credit policy. This is because the allowance for
doubtful accounts will be understated if the company has a poor and inconsistent credit policy.
Another result is the bad debt expense may be understated. A credit policy is a consistent
standard that must be well-written to communicate to the company’s customers. It is an essential
risk management practice to protect the company from doing business with customers that can’t
meet trade payment obligations on time. An inconsistent application of credit policy has a greatly
effect on the customer’s accounts payable. This will cause the misrepresentation on financial
statements because it is determined with the help of credit policies.

10. The trade-off in choosing to update the general ledger accounts in real time is used when
there is an immediate access to files for operations which updates daily. It in unlike in batch
which updates are set in intervals like weekly, quarterly, or monthly. The general ledger would
always be current after every transaction but the operating efficiency may be affected depending
on the size of the company and the number of transactions that are processed. In real time
requires greater resources and dedicated processing capacity. Also, the cost of difference for the
update of general ledger accounts in real time is decreasing.

When a company has a credit policy, the amount of receivables on the books equates to the
payment terms in the company, unless the client is not paying his debt. When the client doesn’t
pay what he owes, company accounting practices may require writing off the bad debt. The
collection part of the credit policy determines how the company approaches collecting its debt,
whether it outsources debt collection or merely writes off bad debt.

This is because the allowance for doubtful accounts will be understated if the company has a
poor and inconsistent credit policy. A credit policy must be properly developed, it can be a
critical tool for maintaining alignment on credit issues throughout your company.
This will cause the misrepresentation on financial statements because allowance for doubtful
accounts is determined using several factors including the credit policies.

and bad debt expense is understated. For example, accounts receivable can be overstated
because allowance for doubtful accounts is understated. This will cause the misrepresentation on
financial statements because allowance for doubtful accounts is determinedusing several factors
including the credit policies.

Accounts receivable may be overstated because allowance for doubtful accounts is understated
due to poor credit policy. Bad debt expense may be understated.

Response:
?Accounts receivable may be overstated because allowance for doubtful accounts is understated
due to poor credit policy.
?Bad debt expense may be understated.

You might also like