Chapter 8:ReceivablesChapter 8:1.Accounts Receivable Defined2.Account for, and control, accounts receivable3.Allowance for Doubtful Accounts4.Use the percentage of sales and aging method for uncollectablereceivables1
Chapter 8:ReceivablesReceivables:Usual•Third most liquid asset•Monetary claims against others•Acquired mainly by:▫selling goods and services (accounts receivable)▫lending money (notes receivable)2 Main Types of Receivables:a.Accounts Receivables (A/R):are the amounts collectible fromcustomers from the sale of goods and services on account.Classifiedas Current Asset on the B/S.Journal Entry to Record A/R:Account ReceivableXXSales RevenueXXb. Notes Receivable:formal contracts, that is a written promise to paythe lender a definite sum at the maturity date, plus interest.Journal Entry to record Note Receivable:Note ReceivableXXCashXXAccounts Receivable2
Bad Debts:A company gets an account receivable only when it sells itsproduct or service on credit (on account). Ideally, the company would collectcash for all of its receivables. However, companies rarely collect all of theiraccounts receivables. So companies must account for their Bad Debts..