Cyber Systems’ management has been actively pursuing clients who fail to pay invoices when they fall due. Based on the experience of Cyber Systems in the 2021 financial year which ends on June 30, the longer an account receivable is outstanding, the more likely the client never pays the amount due. The longer the account is due, the more likely the client closes their travel agency and can never pay amounts due to Cyber Systems. Answer the following: (a) Identify the method and approach that is appropriate to account for bad debts in this case. (b) With reference to three relevant accounting principles, assumptions and/or qualitative characteristics, justify why the method and approach you have identified in part (a) is appropriate. Clearly label each part of your answer related to parts a and b above. In particular for part b, structure your answer as follows for each of the three relevant accounting principles, assumptions and/or qualitative characteristics: Identify accounting principle, assumption or qualitative characteristic......... Justify method and approach appropriateness in the context of accounting principle, assumption or qualitative characteristic above........
Cyber Systems’ management has been actively pursuing clients who fail to pay invoices when they fall due. Based on the experience of Cyber Systems in the 2021 financial year which ends on June 30, the longer an account receivable is outstanding, the more likely the client never pays the amount due. The longer the account is due, the more likely the client closes their travel agency and can never pay amounts due to Cyber Systems. Answer the following:
(a) Identify the method and approach that is appropriate to account for
(b) With reference to three relevant accounting principles, assumptions and/or qualitative characteristics, justify why the method and approach you have identified in part (a) is appropriate.
Clearly label each part of your answer related to parts a and b above. In particular for part b, structure your answer as follows for each of the three relevant accounting principles, assumptions and/or qualitative characteristics:
Identify accounting principle, assumption or qualitative characteristic.........
Justify method and approach appropriateness in the context of accounting principle, assumption or qualitative characteristic above........
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