Bella Boutique Case Analysis

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Elements of the entity’s accounts receivable subsystem
Bella Boutique is a business in Wellington that is managed by Tony. Bella Boutique earns half of its income by selling clothes and accessories on credit.
Bella Boutique offers credit, but not to all customers, as the potential credit customer has to fill out a credit application form. The credit application form states the person’s name, date of birth which is the most important as it helps to verify the correct customer, employment and place of residence amongst other things. Bella Boutique manager Tony has the job of approving the credit applications, to help Tony decide if the potential customer has sufficient funds to pay their debt off to Bella Boutique. He can check the potential customer’s previous and/or …show more content…

They also sign to say they accept any additional charges from Bay Corp if they are behind in their payments and Tony needs Bay Corp to chase them up.
When customers apply for credit accounts some say they can pay a certain amount per week. This number can be used to decide the customer’s limit. The customer may want to set themselves a limit or they may not have had any previous credit accounts and are young, which means that Tony will set a credit limit for them of $100 until he believes that the customer is reliable with payments. To decide a customer’s credit limit, if the customer says that they can pay a certain amount per week that number is multiplied by four to get the amount they can pay per month. For example, M Claire has a credit limit of $2000. Credit limits are important as they stop the customer buying more than they can pay off. Credit limits at Bella Boutique are strictly enforced as most people set them themselves and don’t want to spend more money than they can afford to pay off. This ensures that customers will be able to pay Bella Boutique the amounts owing.
An example of this from the Accounts Receivable Subsidiary Ledgers is when B.

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