Accounts Receivable Management: Pearson PLC Pearson PLC is a multinational learning company headquartered in London, England. The company is known for its business divisions centered on education, publishing, and business information. It is a leading publishing company and is one of the most successful learning businesses in the world. In fact, if you check on some books at a bookstore, most of the books may have been published by Pearson. Because of its multinational base and British foundation, Pearson follows the International Financial Reporting Standards (IFRS) instead of Generally Accepted Accounting Principles (GAAP) of the United States. This is an important distinction since both standards have different terminologies and applications concerning accounts receivable. Historically, all of Pearson's sales are made in credit, so the company must consider the recognition of Sales Return and Allowances, Allowance for Bad Debts, and Bad Debts Expense. These are common accounts for merchandising and manufacturing businesses since goods sold may be returned or payments may go beyond due date. As opposed to merchandising businesses, services rendered are almost impossible to return. This makes Sales Return and Allowances rarely seen in the records and financial statements of a service business. Furthermore, the provision of trade terms is also essential in attracting more customers. Trade terms like 2/15, n/30 This makes Sales Return and Allowances rarely seen in the records and financial statements of a service business. Furthermore, the provision of trade terms is also essential in attracting more customers. Trade terms like 2/15, n/30 makes wholesalers and even retailers buy in bulk and avail of the new products offered for sale. With this, the importance of monitoring sales returns and bad debts are critical to ensure the revenues stay up-to- date and are not affected by fraudulent or dissenting customers. This makes companies like Pearson successfully manage their sales operations and continue to operate on a global scale.

Select the necessary words from the list of possibilities to complete the following statements. 1. A test of the completeness of recorded sales involves tracing a sample of _ 2. The best evidence of collectibility of accounts receivable is examination of subsequent 3. 4. to recorded sales. of the accounts. Loans by a company to its officers, directors, major stockholders, or affiliates require particular attention because these are not the results of arm's length bargaining by independent parties. Before goods are shipped on open account, the sale should be approved by the 5. A confirmation request asks the debtor to respond in all cases.

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The COVID-19 pandemic has affected one of your customers, NEST Ltd adversely. Even though the economies are fast recovering, they have contacted your company to request to purchase on credit instead of cash on delivery. Your boss, Alan, the Marketing Manager has instructed you to review their request. He has asked you to review NEST Ltd’s latest set of financial statements.   (a)In addition, identify other information(other than balance sheet, incomes statement and cash flow statement) that will be helpful in deciding whether to accede to NEST Ltd’s request?    (b)You have also noticed that compared to last year, the allowance for bad debt for Nest Ltd has increased from 2% to 4 % of the accounts receivable. Discuss how this information will impact your review.