Question

Town Hardware sells goods on credit with payment due 30 days after purchase. If payment is not received by the 30th day, the store mails a friendly reminder to the customer. If payment is not received by the 45th day, the store calls the customer and requests payment and also stops offering credit to that customer. These procedures are referred to as the store's:

Multiple Choice

• credit policy.

• collection policy.

• payables policy.

• disbursements policy.

• customer service policy.

Answer 1

option (a) i.e. credit policy is the correct answer.

The Credit policy of a company is a set of guidelines that are used to determine which customers should be allowed the benefit of availing credit. Credit policy set the payment terms for parties to whom credit is extended such as interest on credit, payment date, reminders etc. It also defines the limits to be set on outstanding credit accounts.

Further, the credit polict outline the steps or procedures used to deal with default accounts.

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