As per cross age rule of account receivable, if any debtor does not pay more than the certain limit of his payable account, his whole account will be overdue. When any debtor's account will be listed under overdue category, company can change his credit policy relating to him.
It means, in future, he can get less goods on credit from company if he or she will come under cross age rule of account receivables.
For Example :
Company has fixed the cross age rule of account receivable is 40%. As per this rule, if any debtor does not pay 40% or more of total amount under certain period, then such debtor will be under overdue category. Company may change this % by informing each debtors.
Tax Benefits
If any debtor is under the cross age rule, his total account will be deemed as uncollectable. So, total credit sale will decrease of such account because collection of overdue fund is most difficult for company. Due to decreasing same credit sale will decrease our net profit and taxable amount.
Review of Business Account Receivables
We have also taken credit from our creditors. So, our creditor's credit policy will also affect with cross age rule of account receivable. More debtors under cross age rule means written off from our financial statement. It means, more amount of default debtors. So, we should take strict step to stop such debtors who does not pay on time and in certain limit for getting higher rank for getting credit from our creditors.
It means, in future, he can get less goods on credit from company if he or she will come under cross age rule of account receivables.
For Example :
Company has fixed the cross age rule of account receivable is 40%. As per this rule, if any debtor does not pay 40% or more of total amount under certain period, then such debtor will be under overdue category. Company may change this % by informing each debtors.
Tax Benefits
If any debtor is under the cross age rule, his total account will be deemed as uncollectable. So, total credit sale will decrease of such account because collection of overdue fund is most difficult for company. Due to decreasing same credit sale will decrease our net profit and taxable amount.
Review of Business Account Receivables
We have also taken credit from our creditors. So, our creditor's credit policy will also affect with cross age rule of account receivable. More debtors under cross age rule means written off from our financial statement. It means, more amount of default debtors. So, we should take strict step to stop such debtors who does not pay on time and in certain limit for getting higher rank for getting credit from our creditors.
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