AS91179 Demonstrate understanding of an accounts receivable subsystem for an entity
Accounting 2.6
Internal
3 credits
Assistance with providing evidence about the elements of the accounts receivable subsystem
Note
Evidence must be in context of the business – generic responses/theory do not provide evidence.
Structure your evidence by considering responses to the focus questions. Often if you respond to
the focus question in Excellence in full, you will have covered the focus questions in Achievement
and Merit as well. You do not always need to write everything down. Credit checking has been
done as an example.
Achievement
Credit checking
What is credit checking in My
Business (Achieved)
How is it done/who is
involved/what do they do?
Eg
Credit checking is finding out if
the customer has a good credit
rating/history before you give
them credit. My Business gets
customers to complete a credit
application form (attach a copy if
you have interviewed a real business)
with details of the person and
their employment. (Owner of
My Business) checks with a
credit reporting agency to find
out customers have paid other
accounts in the past.
Merit
Excellence
Why does My business do a
credit check? (Merit)
How and why does credit
checking help My business in
the future/going forward?
(Excellence)
Eg
My Business credit checks all
new customers through a
credit reporting agency and by
having each one complete a
detailed credit application form
Eg
My Business does a credit
check on new customers who
have to fill in a credit
application form (attach a copy if
you have interviewed a real business)
detailing their name, address,
phone, employment and other
debts before offering credit
sales. (My Business owner)
also checks the customers
credit history with a credit
reporting agency so there is a
better chance that they will pay
their accounts and the cash
owing will be received.
(attach a copy if you have interviewed
a real business) providing
personal details including
income and other financial
debts.
It is important that My business
gets the cash owing from credit
customers because My
Business needs this cash to
pay expenses and employees.
If My business doesn’t receive
the cash owing from credit
customers the bad debts will
increase expenses, reduce
profit and mean less essential
cash to pay expenses.
Real business response continued:
The credit checking done by
my business has kept bad
debts to a minimum over the
years.
Case study response continued:
If My Business did a credit
check on J Blogs (person in the
processing exercise who became a
bad debt) his account might not
have become a bad debt and
the cash would have been
received.
What if my business does not do a credit check, is a real business and/or has a special
relationship with its accounts receivable?
Here’s a couple of examples
Achievement
Merit
Excellence
Example one: Wedding Photographer
Kayla is a wedding
Kayla only does wedding
The nature of Kayla’s wedding photography
photographer. Kayla
photography and if her
business means she doesn’t need to do credit
offers clients a choice clients want their wedding checks on clients. Rather when a client
of three wedding
photograph package they chooses one of Kayla’s set price packages, the
packages with set
will pay for it so Kayla
client pays a deposit to secure Kayla as their
prices. Clients choose doesn’t need to do a
wedding photographer. Kayla is a highly
a package and pay
credit check on them.
talented photographer so clients tend to have
Kayla a deposit so she Kayla gets a deposit from lots of money for their wedding photos if they
doesn’t need to check her clients so she can
choose her as their photographer. The deposit
their credit.
keep this if they change
can be kept if, as occasionally happens the
their mind about the
clients decide not to get married and Kayla is
wedding or having her as unable to secure another wedding for that date
their photographer.
as it is too late.
Example two: Maori health provider
Hauora is a Maori
Hauora is a Maori health
Hauora is a Maori health provider offering
health provider
provider offering medical
medical services to low socio-economic clients
offering medical
services to low socioin the community.
services to low socioeconomic clients in the
Hauora doesn’t believe in doing credit checks
economic clients in
community.
on clients because it would go against their
the community.
Hauora doesn’t believe in goal of providing services to low socioHauora doesn’t
doing credit checks on
economic clients in the community.
believe in doing credit clients because it would
This means Hauora has to manage its debtors
checks on clients so
go against their goal of
in a different way to some other businesses.
they don’t.
providing services to low
Hauora encourages them to set up small
socio-economic clients in
regular payments so even though they might
the community.
not have a good credit rating, which Hauora
doesn’t check, Hauora slowly receives the
money owed by most clients.
Teacher notes:
The next page has some focus questions for the other elements but it is important that the
assessment task is written to reflect the actual business being studied.
Students do NOT need to cover all the elements, only those relevant to the business. They must
make some links to the processing in their evidence when this is relevant.
Your assessment task should not include these focus questions – these focus questions should be
part of the student notes that they can bring to / use when doing the assessment task.
Focus questions for other elements
Notes
Wherever possible/relevant provide examples of what you are talking about from the processing
part of this assignment.
Evidence must be relevant to the business studied.
Achievement
Merit
Excellence
Authorisation of transactions
Which documents are
Achievement plus:
Merit plus:
How and why does the
authorised before being issued Why (and when) are the
to the customer/debtor?
document(s) authorised?
authorisation of the
Who authorises the
document(s) help My Business
documents?
in the future/going forward?
How are they authorised?
Internal control of documents
Eg Tax invoice/statement
Eg Tax invoice/statement
Eg Tax invoice/statement
What important information
What important information
What important information
does My Business include on
does My Business include on
does My Business include on
its tax invoice/statement.
its tax invoice/statement.
its tax invoice/statement.
Include the items that My
Include the items that My
Include the items that My
Business needs to record to
Business needs to record to
Business needs to record to
help manage its debtors.
help manage its debtors.
help manage its debtors.
Accounts receivable subsidiary ledger
How does My business use its Achievement plus
Merit plus:
How and why does the
accounts receivable subsidiary Why does My business have
ledger
an accounts receivable
subsidiary ledger help My
subsidiary ledger?
Business in the future/going
forward?
Statements to debtors
What important information is
Achievement plus:
Merit plus:
Why does My business
How and why do statements
included in My Business’s
prepare and send out monthly to debtors help My business in
statements to its debtors?
How often are the statements
statements to debtors?
the future/going forward?
sent out?
Aged debtors report
What information does the
Achievement plus
Merit plus:
Why is this information useful
How and why does this
aged debtors report tell me
about My Business’s debtors
for My Business management
information help My Business
of it debtors
going forward?
Reconciling the accounts receivable subsidiary ledger with the accounts receivable control
account
What does this mean?
Why does My Business
How and why does My
How/when does My Business
reconcile its accounts
Business reconcile its accounts
reconcile its accounts
receivable subsidiary ledger
receivable subsidiary ledger
receivable subsidiary ledger
with the accounts receivable
with the accounts receivable
with the accounts receivable
control account?
control account to help My
control account?
Business going forward.