chapter 9

chapter 9 - Objectives: Chapter 9 Receivables Accounting...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Chapter 9 Receivables Accounting Professor Dominica Lee September 2005 2 ACY1111 D. Lee 2005-2006 Objectives: (a) Accounts receivable - Recognizing - Valuation - Disposition (b) Notes Receivable - Recognizing - Valuation - Disposition 3 ACY1111 D. Lee 2005-2006 Receivables Classifications of Receivables: 1. Accounts Receivables: Owed by customers on account . Usually due within 30 to 60 days. Sometimes called Trade Receivables : i.e. arise from sales to customers. 2. Notes Receivables: Claims supported by a formal document. Are written promises to pay a creditor a definite sum at a specific future date . Often used for credit periods of more than 60 days. Can be short-term or long-term. 3. Other Receivables: e.g. interest receivable, loan to employees etc. 4 ACY1111 D. Lee 2005-2006 Recognizing Accounts Receivable A/R xx Sales xx Cash xx Sales Discounts xx A/R xx ± Receivables are current assets on the balance sheet ± They are stated at net realizable value, the amount expected to be received in cash. ± Uncollectible A/R are accounted for using two methods (1) Direct write-off method. (2) Allowance method. VALUATION OF A/R 7 6 ACY1111 D. Lee 2005-2006 ± No entries are made for bad debts until an account is determined to be uncollectible at which time the loss is charged to bad debts expense. ± Bad debt expense shows only actual losses. ± Not acceptable for financial reporting purposes unless losses are insignificant. DIRECT WRITE-OFF METHOD
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 7 ACY1111 D. Lee 2005-2006 Valuing Accounts Receivables (1) Direct write-off method: e.g. credit sales in 2004 = $100,000 All of these accounts were collected except one from X for $100, which was not determined to be uncollectible until March 2005. 2004 A/R 100,000 Sales Revenue 100,000 March 2005: To write off X’s account: Bad Debts Expense 100 A/R – X 100 Recovery: Nov. 2005 A/R – X 100 Bad Debts Exp. 100 To reinstate account written off earlier in the year Cash 100 A/R – X 100 What accounting principle does this method violate?
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

chapter 9 - Objectives: Chapter 9 Receivables Accounting...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online