Understanding accounts payable and receivable

We have gone through some exercises on accounts payable and receivable (creditors and debtors). Now we will test your understanding of these concepts.

T-Z is a successful company producing custom T-shirts. Their balance sheet for the past three months broken down by month looks as follows:

Balance Sheet Item	January	February	March
Accounts Receivables\Debtors	1000	750	750
Accounts Payables\Creditors	300	600	900
Bad Debts	0	250	0

Choose the most likely analysis of these balances.

Answer the question

50 XP

Possible Answers

T-Z has a large debtors balance, but has received payment in February, the creditors have also been increasing each month, which could indicate a longer payback period.
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T-Z has not reduced their debtors' balance but has written off some bad debts in February, which needs monitoring. The creditors are increasing, which is good for cash flow.
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T-Z has increased debtors, which is good for cash flow. However, the creditors and bad debts are growing, which could be a risk.
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