Which one of these statements correctly applies to a lockbox system of cash collections?

Question

Quizplus · Accepted Answer

In a lockbox system, checks are collected and processed by the bank rather than the company receiving the payments. This allows for quicker deposit and clearance of funds. With traditional lockboxes, the bank would deposit the checks and then send a report to the company who would then apply the payments to the appropriate accounts. With electronic lockboxes, the processing and application of payments can be automated. In both cases, checks can be deposited prior to the payments being applied to the customers' accounts, which is an advantage of the lockbox system. Option A is incorrect because the collection time can also be reduced with the lockbox system. Option B is incorrect because traditional lockboxes are still used in some cases. Option D is incorrect because the processing delay is actually reduced with the lockbox system. Option E is incorrect because the bank will initiate the check-clearing process once the checks have been deposited.

Which One of These Statements Correctly Applies to a Lockbox