Accounts Receivable Management

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AN EVALUATION OF ACCOUNTS RECEIVABLE MANAGEMENT BY MANUFACTURING FIRMS IN NAKURU MUNICIPALITY

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RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE IN BACHELOR OF COMMERCE (ACCOUNTING OPTION)

SCHOOL OF BUSINESS

KABARAK UNIVERSITY

APRIL 2008

DECLARATION

This research project is our original work and has not been presented for the award of any diploma or degree in any other university or college or any other institution of higher learning.

Signature______________________________ Date________________________

Caleb Yegon

Signature______________________________ Date________________________

David Momanyi

Signature______________________________ Date________________________

Ichomi Okalio

This research project has been submitted with my approval as the university supervisor

Signature……………………………….Date………………..

MR. KEFA ABOKO

LECTURER

ACKNOWLEDGEMENT

We are thankful to our supervisor Mr. Kefa Aboko for his support and time during the proposal writing. We would also like to extend our gratitude to the students of Kabarak as a whole who extended their courtesy and knowledge and gave us support while preparing this proposal. We owe all our work to prior and continuous support from all our lecturers at Kabarak University who provided us with a solid foundation. We are thankful to all those who gave their time and knowledge towards meeting the objectives of this proposal.

ABSTRACT

This study looked at the evaluation of accounts receivable management in manufacturing organizations. Many organizations today are faced with the problem of having huge accumulated balances owing to accounts receivables which are sometimes written off and thus interfering with the organizations operations. Accounts receivable management tries to minimize the amounts of money tied up in form of accounts receivables and thus takes the organization back to its original set goals.

This study describes target population comprising of all the manufacturing firms in Nakuru municipality which was the sample and census was employed as the population was less than 30. There are 25 manufacturing companies within the municipality. Data was collected using a closed-ended and Likert questionnaire and was analyzed using the mean, median, mode, and frequency tables. The findings were presented in the form of graphs, charts and tables. Findings were 23% of the respondents use agents, 54% use employees to collecting debts and 38% use the accounts receivables as collateral to get finance from banks.23% had taken the insurance cover against the uncollectible amounts.54% of the respondents estimate bad debts by comparing the outstanding amounts and their respective credit sales.77% of the manufacturing firms determine bad debts by aging. 77% of respondents write off their debts after a period of one year while 23% write off the accounts receivables as bad debts after six months. 84% of respondents provide for bad and doubtful debts. 77% of the manufacturing firms use a percentage of the ending accounts receivable balance to estimate the allowance for uncollectible accounts. Limitation of this study was that it was done in Nakuru and assumed to apply to other manufacturing companies in other parts of the country.

TABLE OF CONTENTS

Page

DECLARATIONi

ACKNOWLEDGEMENTii

ABSTRACTiii

TABLE OF CONTENTSiv

LIST OF TABLESvi

LIST OF FIGURESvii

LIST OF ABBREVIATIONSviii

DEFINITIONS OF OPERATIONAL TERMSix

CHAPTER ONE: INTRODUCTION1

1.1 Background to the study1
1.2 Statement of the problem2
1.3 OBJECTIVES OF THE STUDY2
1.3.1 General objective2
1.3.2 Specific objectives.3
1.4 Research Questions.3
1.5 Significance of the Study3
1.6 Scope of the Study3

CHAPTER TWO:...
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