A reasonable amount of uncollectible accounts is evidence

Question

Quizplus · Accepted Answer

A reasonable amount of uncollectible accounts is evidence of a sound credit policy because it shows that the company is extending credit to customers who are capable of paying but also accepting that some customers may not be able to pay and factoring that into their overall financial planning. A credit policy that does not allow any uncollectible accounts may be too strict and result in missed sales opportunities, while a policy with a high amount of uncollectible accounts may be too lenient and result in financial difficulties for the company. Poor judgments on the part of the credit manager could certainly contribute to uncollectible accounts, but that alone is not evidence of the effectiveness of the credit policy as a whole.

A Reasonable Amount of Uncollectible Accounts Is Evidence