Which of the following internal controls should be put in place to try and prevent further bad debts?

Company M has lost 25% of its revenue in the last three months due to bad debts. One of the receivables written off was from a long standing customer and the other three were from new customers. The management accountant has warned the sales team that the company cannot survive any more substantial bad debts.

Which of the following internal controls should be put in place to try and prevent further bad debts?
A . A credit check should be carried out on each new customer.
B . Credit limits should be set for all customers. However, if the credit limit will cost a sale then sales staff can override this limit.
C . Two sales staff must authorise new customers and sign a form stating that they have done so.
D . An aged analysis of customer balances must be reviewed every month.
E . As soon as a customer payment is overdue they should not be allowed to purchase more until their balance has been reduced.

View Answer

Answer: A,D,E