Customer credit limit
A customer credit limit is the maximum credit exposure a business permits for a customer under its credit policy. It helps control the risk of non-payment while allowing approved credit sales. The limit should be reviewed alongside payment history and outstanding orders; it is a management control rather than an accounting valuation.
Worked example
A customer with a 5,000 limit and 4,800 outstanding may need approval for a further 500 sale.
Common mistake
Assuming a credit limit guarantees payment or removes the need to monitor overdue accounts.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Supporting | July 2027–August 2028 |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: credit limit