Accounts Receivable, Inventory,
and Total Quality Management
JOIN KHALID AZIZ



ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS,
B.COM.
FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4
ICAP MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP
MODULE D, BBA, MBA & PIPFA.
CONTACT:
0322-3385752
R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA,
KARACHI, PAKISTAN.
Accounts Receivable
Management
Determinants of Accounts Receivable
 Percent of Credit Sales to Total Sales
 Level of Sales
 Terms of Sale
 Quality of Customer
 Collection Efforts
Accounts Receivable
Management
Terms of Sale
 quoted as a/b net c , which means
“deduct a% if paid within b days,
otherwise pay within c days.”
3/30 net 60, means “deduct
3% if paid within 30 days, otherwise
pay the entire amount within 60 days.”
 example:
Accounts Receivable
Management
Terms of Sale
 annualized opportunity cost of
foregoing a discount:
Accounts Receivable
Management
Terms of Sale
 annualized opportunity cost of
foregoing a discount:
a
1-a
x
360
c - b
Accounts Receivable
Management
a
1-a
x
360
c - b
opportunity cost of forgoing 3/30 net 60:
Accounts Receivable
Management
a
1-a
x
360
c - b
opportunity cost of forgoing 3/30 net 60:
.03
1 - .03
x
= 37.11%
360
60 - 30
Inventory Management
 Too
much inventory is expensive and
wasteful.
 Not enough inventory can result in lost
sales.
Inventory Management
 Raw
Materials Inventory - basic materials
to be used in the firm’s production
operations.
 Work-in-Process Inventory - partially
finished goods requiring additional work
before becoming finished goods.
 Finished goods Inventory - completed
products that are not yet sold.
 Stock of Cash - inventory of cash to allow
payment of bills.
JOIN KHALID AZIZ



ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS,
B.COM.
FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4
ICAP MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP
MODULE D, BBA, MBA & PIPFA.
CONTACT:
0322-3385752
R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA,
KARACHI, PAKISTAN.
Inventory Management
 Optimal
inventory order size: the Economic
Order Quantity (EOQ) model:
Inventory Management
 Optimal
inventory order size: the Economic
Order Quantity (EOQ) model:
Q* =
2SO
C
Inventory Management
Q* =
2SO
C
Q = inventory order size in units
C = cost of carrying 1 unit in inventory
S = total demand in units over planning
period
O = ordering cost per order
Example: Inventory
Management
Q* =
2SO
C
Q = inventory order size in units
C = cost of carrying 1 unit in inventory = 1.25
S = total demand in units over planning
period = 10,000 units
O = ordering cost per order = $250
Example: Inventory
Management
Q* =
2SO
C
Example: Inventory
Management
Q* =
Q* =
2SO
C
2x250x10,000
1.25
Example: Inventory
Management
Q* =
Q* =
2SO
C
2x250x10,000
1.25
= 2,000 units
Order Point Problem
Average
=
inventory
EOQ
2
+ safety stock
TQM
 Total
Quality Management: a
company-wide systems approach to
quality.
 An effort to increase quality through
better supplier relations.
 Interdependence between supplier
and customer allows for development
of new, better products.
ATTENTION COMMERCE
STUDENTS
ACCOUNTING(FINANCIAL & COST) OF
ICMAP STAGE 1,2,3,4
CA..MODULE B,C,D
PIPFA (FOUNDATION,INTERMEDIATE,FINAL)
ACCA-F1,F2,F3
BBA,MBA
B.COM(FRESH),M.COM
MA-ECONOMICS..O/A LEVELS
KHALID AZIZ…..0322-3385752..kARACHI
JOIN GROUP
http://finance.groups.yahoo.com/group/cost-accountants