MindMap Gallery Personal accounts for credit customers

Personal accounts for credit customers

Introduction of personal accounts for credit customers, which refers to individual accounts that are established for customers who have been granted credit by a business or financial institution. These accounts are typically used in the context of retail or commercial transactions where customers are allowed to make purchases on credit, rather than paying with cash or immediate payment methods.

Edited at 2023-09-08 01:10:21

Aqif Syauqi Shahruddin

Personal accounts for credit customers

Aqif Syauqi Shahruddin

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Personal Accounts for Credit Customers

Trade Receivables General Ledger Account

Show the total is owed to business from all credit customer.

Amount owed by an individual customer cannot be seen from general ledger.

Business need to maintains individual ledger.

The Need For Personal Account for Each Customer

1. Business be able to tell the customer the state of their account.

2. Business send out statements to credit customers at end of month

Showing debt they still owe,itemising new invoices sent out and payment received.

3. Business want to keep a check on credit position of individual customer.

To ensure no customer is exceeding their credit limit.

4. To match payments against debts owed.

Authorisation

1. Allowing customer to have credit account

Require references from suppliers with whom they already have credit account and their bank.

2. The customer's credit limit

Depend upon the information supplied.

3. The order need to be authorised by credit control department

If customer has invoices overdue for payment,it may decided no futher orders can be accepted.

Authorisation of invoices and credit notes before transactions are initiated

Benefits and costs of offering credit facilities to customers

1. Benefit

Allowing businesses to keep trading without having to provide cash 'up front'.

Allow credit terms to customers and receive credit terms from its supplier.

2. Credit Control

A customer will be given a credit limit.

Aged receivables analysis

Shows how long invoices been outstanding and indicate a customer is unable to pay.

A system for chasing up payment of late oustanding invoices.

3. Costs offering credit facilities to customers

Interest costs of an overdraft,if customers do not pay promptly.

Costs of trying to obtain payment.

Court costs.

The receivables ledger.

Contains the individual personal account showing each individual account receivable of the business owes.

Debit

When invoices entered in the trade receivables general ledger account

they also made in the debit side of the relevant customer account in the receivables ledger.

Credit

When entries are made in the bank general ledger account in respect of payments received from customers,or if goods are returned

they are made in the credit side of the relevant customer account.

Personal accounts as memorandum accounts

In some computerised accounting systems,the personal accounts of customers do not form part of the double entry system of bookkeeping.

Because the personal accounts include details of transactions which have already been recorded in the general ledger.

For example,

sales invoices are recorded in sales and trade receivables general ledger accounts,and payments received from customers are recorded in the bank and trade receivables general ledger accounts.

The personal accounts of customers do not then form part of the double entry system

if they did,transactions would be recorded twice over.

Therefore,sometimes the individual accounts are shown as a list of invoices less cash received.

Using the example above of Cook Co: