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Unformatted text preview: chapter 9 Receivables ______________________________________________ OPENING COMMENTS Chapter 9 presents the accounting issues related to accounts receivable and notes receivable. The chapter opens with the common classifications of receivables. While presenting those classifications, you will need to make a clear distinction between accounts receivable and notes receivable. Accounting issues related to uncollectible receivables are covered next. Both the allowance and direct write-off methods are presented. If class time is scarce at this point, coverage of the direct write-off method (theoretically unacceptable because it violates the matching concept) may be omitted without disrupting the flow of the text. Simply omit coverage of Objectives 3 and 5. After addressing uncollectible accounts, the text discusses notes receivable transactions. The text presents how to calculate the due date, interest, and maturity value of a note. The journal entries to record the acceptance of a note, receipt of payment on a note, and dishonoring of a note are discussed in detail. Discounting notes receivables is covered in a chapter appendix. The last part of the chapter presents a Financial Analysis and Interpretation section that discusses financial ratios related to receivables: the accounts receivable turnover and the number of days’ sales in receivables. After studying the chapter, your students should be able to: 1. Describe the common classes of receivables. 2. Describe the accounting for uncollectible receivables. 3. Describe the direct write-off method of accounting for uncollectible receivables. 4. Describe the allowance method of accounting for uncollectible receivables. 5. Compare the direct write-off and allowance methods of accounting for uncollectible accounts. 6. Describe the accounting for notes receivable. 7. Describe the reporting of receivables on the balance sheet. 133 This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher. 134 Chapter 9 Receivables This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher. STUDENT FAQS • Why should we have to learn direct write-off method of recording bad debts when we cannot use it with the accrual basis of accounting? • How accurate are companies with their estimates (guesses)? • Isn’t estimating bad debts a way of manipulating net income? • How does a company keep control on these estimates? • How does one go about determining if uncollectible receivables are within a reasonable range?...
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- Spring '10