Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Receivables/Payables
- This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.
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- October 27, 2017 at 4:46 am #413348
Hello.
First of all, I’m extremely grateful for your lectures, comprehensive & you make it seem very simple. THANK YOU.
I have a doubt regarding receivables and payables.
What exactly does an “overdraft” mean with regard to receivables & payables?
Also, when solving, why is it that we calculate interest savings on the new receivables?Thank you!
October 27, 2017 at 7:42 am #413368Thank you for your comment.
An overdraft is a negative balance at the bank (i.e. they owe money to the bank, and will therefore have to pay interest to the bank).
If (for receivables) they give credit to customers it will delay receiving the cash and therefore they will have a bigger overdraft and be paying more interest during the period. If they get the money in sooner, then the overdraft will not be so big and therefore they will be saving interest.
It is the same logic for payables – if they pay fast then the overdraft will be bigger and they will pay more interest. If they delay payment, then the overdraft will be smaller and they will save interest.
October 27, 2017 at 12:34 pm #413394Understood. Thank you so much 🙂
October 27, 2017 at 2:56 pm #413412You are welcome 🙂
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