Customer credit limits, order holds and bad debts

Skills you'll practise

• List the checks to complete before opening a credit account and who should approve the limit
• Calculate a customer's credit exposure and decide whether a new order can be released
• Record a bad debt write-off directly and against an allowance
• Calculate a policy-based allowance from an aged receivables listing
• Record a recovery of a debt previously written off
• Explain why tax treatment of bad debts is checked with the accountant

Course outline

1. 1.Customer credit limits, order holds and bad debtsVideo · 2 min
2. 2.Opening a credit accountLesson · 15 min
3. 3.Exposure, holds and releasesLesson · 16 min
4. 4.Bad debts, allowances and recoveriesLesson · 17 min
5. 5.Customer credit limits, order holds and bad debts: knowledge checkKnowledge check · 18 questions
6. 6.Friday afternoon, an order over the limitScenario
7. 7.Final exam10 questions · passing it completes the course, so people who already know the material can test out

Sources it draws on

The lessons and questions are written from these references, so learners can go back to the original.

• IRS Tax Topic 453, Bad debt deduction (US example: a business bad debt must have been included in income and be worthless; reasonable collection steps)
• U.S. GAO: Standards for Internal Control in the Federal Government (the "Green Book"). Control activities include reconciliations and reviews
• General bookkeeping practice (journals, ledgers, reconciliations, schedules, review and sign-off)