A lockbox system is designed to speed up the collection and deposit of customer payments by having banks process and deposit checks before the company records them in their accounts receivable.

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A Lockbox System

Question 288

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: