Ch6-8 - Receivables and Inventories Chapter 6 A200 Common...

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Receivables and Inventories Chapter 6 A200
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Common classifications of Receivables Receivables are: Amounts the business is owed Assets on the Balance Sheet Current if the business expects to receive the amount within one year Long-term if the business expects to receive the amount in longer than one year Types of Receivables: Accounts Receivable Notes Receivable Other Receivables (Interest Receivable related to a Note Receivable is the most common type)
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Accounts Receivable : is a current asset that comes from selling goods or providing services without being paid immediately. Purpose: sell more goods “ I would gladly pay you Tuesday for a Hamburger today” Sold $1000 worth of merchandise on account. + A/R 1000 + Sales 1000 Provided $250 worth of financial services on account. + A/R 250 + Fees Earned 250
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Notes Receivable : come from selling goods, providing services, or lending cash in exchange for a promissory note (written promise to pay a certain sum of money at a specified date or on demand). Barnaby company sold a $24,000 tractor to Mr. Smith who signed a Note. + N/R 24,000 +Sales Revenue 24,000 Wesson company provided $8,000 worth of Architectural services in exchange for a Note. + N/R 8,000 + Fees Earned Revenue 8,000 Suntrust Bank loaned $95,000 to ABC Corporation +N/R 95,000 Cash (95,000) Maker: (debtor) makes the promise to pay off the note. Payee: (creditor) is the person who will be paid.
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Notes Receivable can also come from exchanging an Account Receivable for a Note Receivable. 1/1 Staples sold office supplies to JMV Corp on account for $1,500 net 30. 1/1 +A/R 1,500 +Sales Revenue 1,500 On 1/3 1, JMV Corp was unable to pay Staples and agreed to sign a 90 day note in exchange for the account. 1/31 +N/R 1,500 - A/R 1,500 Other Receivables: Interest receivable and taxes receivable
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Difference between Note receivable and an A/R A/R are usually outstanding 30 days or less. Notes > 30 days. Interest is paid on a N/R not an A/R.
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Ch6-8 - Receivables and Inventories Chapter 6 A200 Common...

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