CIMA Exam CIMAPRO19-P03-1 Topic 2 Question 45 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam

Question #: 45
Topic #: 2

Company M has lost 25% of its revenue in the last three months due to bad debts. One of thereceivables written offwasfroma long standing customer and the other three werefromnew customers. The management accountant has warned the sales team that the company cannot survive any more substantial bad debts.

Which of the following internal controls should be put in place to try and prevent further bad debts?

AA credit check should be carried out on each new customer.

BCredit limits should be set for all customers. However, if the credit limit will cost a sale then sales staff can override this limit.

CTwo sales staff must authorise new customers and sign a form stating that they have done so.

DAn aged analysis of customer balances must be reviewed every month.

EAs soon as a customer payment is overdue they should not be allowed to purchase more until their balance has been reduced.

Show Suggested Answer

Suggested Answer: B, E, F

by Whitley at Feb 07, 2023, 10:54 AM

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Sophia

13 days ago

Cutting off customers who are late on payments? That's a bold strategy, Cotton, let's see if it pays off.

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Beatriz

16 days ago

Aged analysis of customer balances? Sounds like a job for a forensic accountant, not the sales team.

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Martina

20 days ago

Two sales staff authorizing new customers? That's like having a bouncer and a doorman at a sandwich shop.

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Elenora

21 days ago

Overriding credit limits? That's like giving a toddler a credit card and saying 'have at it!'

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Vivienne

6 days ago

A) A credit check should be carried out on each new customer.

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2 months ago

I think option A is a good idea to prevent bad debts.

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