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ACCA Applied Knowledge · Business and Technology · The relationship between accounting and other business functions

Sales staff at a company are paid a bonus based solely on the value of sales orders obtained. Which problem is most likely to arise that concerns the accounting function?

The likely problem is that salespeople accept orders from customers with weak credit, since the bonus rewards order value rather than cash collected. This increases irrecoverable debts and cash flow strain, so finance may want bonuses linked to payment received or credit checks.

  1. AOrders may be accepted from customers with poor credit, leading to bad debtsCorrect
  2. BSales staff will have no incentive to obtain orders
  3. CThe business will be unable to prepare a budget
  4. DInventory will always be understated

Explanation

Rewarding order value only encourages staff to win sales regardless of customer quality, increasing the risk of irrecoverable debts and cash shortages. It does provide an incentive to obtain orders, and it does not prevent budgeting or systematically understate inventory.

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