Thai Flavours which is owned by Aroon Sakad, earns most of its income from selling spices and dinner wear on credit to either other retailers or restaurants. Thai Flavours is registered for the GST on the invoice basis, which means the GST is required to be paid in the same period as the invoice was issued, rather than when the payment has been received or made. Aarons goals for Thai Flavours are to make a profit and to have a positive cash flow so they will be able to pay off all outstanding debts and liabilities. Since Aroon won 't have to worry about having to borrow money from the bank on credit to pay off liabilities he is able to channel more resources into expanding his business to be able to sell Kitchen appliances. Aroon has realised
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A credit limit puts a restriction on how much a single customer can owe on credit at a certain time. Aroon should implement this internal control as it forces customers to pay back their debts so they are able to purchase more items on credit. This internal control customers would pay back their debts in order to purchase new products rather than the current system, where Thai Flavours has let Royal Thai obtain $20,300 of credit purchases without a single payment in June. Normally the credit limit is determined off how much a single customer owes at the end of the month on average, then the credit limit is made a little bit higher than the average. In March Royal owed Thai Flavours $13,258, at the end of may Royal Thai owed $14,780. If Thai Flavours are to put a credit limit on Royal Thai’s purchases a reasonable credit limit would be $16,000. This is reasonable as it still allows Royal Thai to make minor purchases that are over their average, but in order to make higher costing purchases Royal Thai must first pay off some of their debt so they will be under their credit limit. This ensures Aroon that his customers must pay off some of their debt to continue purchasing on credit rather than being able to continue to purchase items without paying anything back to Thai Flavours. If Aroon notices that customers such as Mekong Neua have been up to date in their payments and …show more content…
Included in the report is a list of all of the debtors names, amount owed by each debtor and a breakdown of the debts by how long they have been outstanding for (in months). In the case of Thai Flavours, Aroon is able to see by looking at the aged debtors report that out of the $47,685 with $30,920 of that being owed from a month or more ago. The purpose of the aged debtors report is so Aroon is able to see all of the customers who are owing Thai Flavours, and be able to see how old their debts are. Using the report Aroon is able to decide whether or not to stop selling to certain customers on credit if they have outstanding debt from four or more months ago, for example Blue Elephant which owes $6,420 from four or more months ago. Aroon could decide to stop selling to customer like Blue elephant to help reduce bad debts and to pressure the customer into paying back the money they owe to be able to purchase on credit again. The aged debtors report can also make it very easy for Aroon to be able to see who Thai Flavours need to send letters or phone calls to try to get the debts paid. The aged debtors report makes it easier for Aroon to see which of his customers have outstanding debts from the months before the current month. Aroon will be able to send letters to the customers based on how long they have had the debt owing to Thai
A credit limit puts a restriction on how much a single customer can owe on credit at a certain time. Aroon should implement this internal control as it forces customers to pay back their debts so they are able to purchase more items on credit. This internal control customers would pay back their debts in order to purchase new products rather than the current system, where Thai Flavours has let Royal Thai obtain $20,300 of credit purchases without a single payment in June. Normally the credit limit is determined off how much a single customer owes at the end of the month on average, then the credit limit is made a little bit higher than the average. In March Royal owed Thai Flavours $13,258, at the end of may Royal Thai owed $14,780. If Thai Flavours are to put a credit limit on Royal Thai’s purchases a reasonable credit limit would be $16,000. This is reasonable as it still allows Royal Thai to make minor purchases that are over their average, but in order to make higher costing purchases Royal Thai must first pay off some of their debt so they will be under their credit limit. This ensures Aroon that his customers must pay off some of their debt to continue purchasing on credit rather than being able to continue to purchase items without paying anything back to Thai Flavours. If Aroon notices that customers such as Mekong Neua have been up to date in their payments and …show more content…
Included in the report is a list of all of the debtors names, amount owed by each debtor and a breakdown of the debts by how long they have been outstanding for (in months). In the case of Thai Flavours, Aroon is able to see by looking at the aged debtors report that out of the $47,685 with $30,920 of that being owed from a month or more ago. The purpose of the aged debtors report is so Aroon is able to see all of the customers who are owing Thai Flavours, and be able to see how old their debts are. Using the report Aroon is able to decide whether or not to stop selling to certain customers on credit if they have outstanding debt from four or more months ago, for example Blue Elephant which owes $6,420 from four or more months ago. Aroon could decide to stop selling to customer like Blue elephant to help reduce bad debts and to pressure the customer into paying back the money they owe to be able to purchase on credit again. The aged debtors report can also make it very easy for Aroon to be able to see who Thai Flavours need to send letters or phone calls to try to get the debts paid. The aged debtors report makes it easier for Aroon to see which of his customers have outstanding debts from the months before the current month. Aroon will be able to send letters to the customers based on how long they have had the debt owing to Thai