Question

On August 1, a customer pays cash to fulfill its accounts receivable obligation. What is the impact on Company A, given the account was 58 days past due (normal payment terms are 30 days after delivery)?

a) Relief
b) Unchanged
c) Displeasure
d) Neutra

Answer 1

When the customer pays cash to fulfill their overdue accounts receivable, it has a neutral impact on Company A, as it simply neutralizes the past due amount. The normal payment terms were 30 days after delivery, and the 58-day overdue payment is significantly past the due date.

Step-by-step explanation:

When a customer pays cash to fulfill its accounts receivable obligation, it has a positive impact on Company A. In this case, the account was 58 days past due, which means the customer was late in making the payment. The fact that the payment was made in cash indicates that the customer settled the outstanding amount.

Usually, accounts receivable have payment terms, and in this case, the normal payment terms are 30 days after delivery. So, the 58-day overdue payment is significantly past the due date and would have been a cause for concern for Company A.

Therefore, the correct answer is d) Neutral. The customer fulfilling its accounts receivable obligation by paying in cash does not bring relief or displeasure to Company A. It simply neutralizes the past due amount.