Chapter 15: Credit transactions question (Neville Box)

[Sigma]

Why should a firm that sells on credit maintain individual debtor’s records?

[Jigsaw]

A firm that sells on credit should maintain individual debtors records for ease of reporting! Firstly, the debtors records allows the firm to calculate the total amount owing from debtors, simply by adding each total from each individual journal, which will assist when making a debtors schedule. This can act as a double checking mechanism for the debtors formula. It can detect if there's an error between the balance calculated by the formula, and that of the debtors schedule, improving accuracy of reports. Furthermore, maintaining individual debtor records will allow better the better management of the firm's debtors; knowing who owes what, and when it is due, if they are late to pay etc.

Hope this helped!