Chapter_7 - = Net Sales Average Net Accounts Receivable...

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Sales Revenue, Receivables, and Cash Chapter 7
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Sales Revenue Revenue Recognition Principle Installment Method When initial sale is made we are going to recognize at that point cost and revenue but no profit Percentage of Completion Method Recognize revenue and match cost therefore income based on the work done this year Completed Contract Method Wait until the contract is completed and then recognize all the revenue
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Other Sales Issues Sales Returns and Allowances A company may allow its customers for return profit Reduces sales, record sale and return separately Credit Card Discounts Expense of doing sales, contra revenue Sales Discounts Allow customers to buy on account. Pay later Pay less if you pay quicker Gross Profit Percentage = Gross Profit Net Sales
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Receivables Bad Debts Percentage of Credit Sales Aging of Accounts Receivable
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Receivables Ratios Accounts Receivable Turnover Ratio
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Unformatted text preview: = Net Sales Average Net Accounts Receivable Measures how well the managers are creating and collecting accounts receivable Numerator should only have credit sales, exclude cash sales and credit card sales in a perfect world Denominator net accounts receivable, accounts receivable we expect to collect Receivables Ratios Average Collection Period = Average Net Accounts Receivables Average Sales per Day Or = 365 days Accounts Receivable Turnover Ratio Inverse Lower number is better Control of Cash Level of Cash High level cash = bad rate of return Internal Controls Important when it comes to cash Safeguard cash Dividing work among several people regarding cash Bank Reconciliation Reconciling the bank account Compare the records the company keeps of the money in the company with the records kept by the bank...
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This note was uploaded on 04/02/2010 for the course AFM AFM 101 taught by Professor Kennedy during the Fall '09 term at Waterloo.

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Chapter_7 - = Net Sales Average Net Accounts Receivable...

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