3. Describe four ways in which accounts receivable can be recorded.

Finance company

A finance company grants credits with various terms, partly on security and partly blank. Second or third mortgages are accepted as security. Collateral in the form of cars, boats and the like are accepted as well. Credits may be granted at a fixed interest percentage during the entire credit term, or at percentages which are adapted monthly to market developments. Monthly installments are either fixed amounts or annuity determined (a fixed sum of installments and interest).

Furniture store

A furniture store sells against cash payment and on account. Sale on account is offered only to clients with a valid machine-readable charge card (badge). The store uses two systems for billing sales on account: monthly invoices or (separate) invoices for each transaction. Monthly invoices are due within one month of the billing date. The other invoices concern larger purchases and are payable in three monthly installments. The store uses a microcomputer for periodic billing and the accounts receivable administration.