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Chapter 4: 2DQ (page 405)

Explain how the collections and purchases schedules are related to the borrowing needs of the corporation

Short Answer

Expert verified

The purchase and collections schedules calculate how quickly purchases are paid for and receivables are recovered. The business must seek to borrowing to make up the shortfall if the amounts of accounts receivable collections is insufficient to pay all purchasing costs and other financial necessities.

Step by step solution

01

collections

The sum owed to a business for delivered or utilized goods or services customers haven't yet paid for is known as accounts receivable (AR) or collection.

02

 Step 2: Disadvantage

Even though accounts receivable is recorded on the business balance sheet as an asset, it can negatively affect its cash flow. The business must pay the inventory and labor costs to sell products and services to the customers. If the company cannot pay that cost, it affects cash flow

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