A lockbox system is designed to speed up the collection and deposit of checks by having a bank process payments before they are recorded in the company's accounts, thus reducing the collection float.

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A Lockbox System

Question 286

Multiple Choice

A lockbox system:

A) Entails the use of a single bank which is centrally located to collect payments from geographically diverse customers.
B) Deposits customer cheques prior to recording customer payments to their respective receivable accounts.
C) Is used to reduce the disbursement float of a firm.
D) Is efficient regardless of the locations selected for lockbox destinations.
E) Entails the posting of customer payments to their receivables account followed by a deposit of the funds received.

Correct Answer: