Delinquency Cost

This cost arises of the failure of the customers to meet their obligations when payment on credit come due after the expiry of the credit period, Such costs are called delinquency. The important components of this (i) blocking up of funds for an extended period, (ii) with steps that have to he initiated to collect the over dues, such as, reminders and other collection efforts, legal charges, where necessary, and so on. Default Cost Finally, the firm may not I able to recover the over dues because of the inability of the customers. Such (It-hts arc treated as had debts and have to he written off as they cannot be Such costs are known as default co,t~ associated with credit sales and accounts receivable.

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