Chapter 9s (1)

Chapter 9s (1) - Chapter 9 Accounting for Receivables...

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Accounting for Receivables Chapter 9
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Learning Objectives Account for credit sales Apply different methods to account for bad debts expenses Account for note receivables
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Accounts Receivable Amounts due from customers for credit sales. Credit sales require: Maintaining a separate account receivable for each customer. Accounting for bad debts that result from credit sales.
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On July 16, Barton, Co. sells $950 of merchandise on credit to Webster, Co., and $1,000 of merchandise on account to Matrix, Inc. Sales on Credit Jul. 16 Accounts Receivable - Webster 950 Sales 950 To record credit sales to Webster Co. Accounts Receivable - Matrix 1,000 1,000 To record credit sales to M atrix, Inc.
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On July 31, Barton, Co. collects $500 from Webster, Co., and $800 from Matrix, Inc. on account. Sales on Credit Jul. 16 Cash 500 Accounts Receivable - Webster 500 To record cash collections on account 800 Accounts Receivable - Matrix 800
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Sales on Credit Date PR Debit Credit Balance Jul. 16 950 950 Jul. 31 500 450 Matrix, Inc. Date PR Debit Credit Balance Jul. 16 1,000 1,000 Jul. 31 800 200 Accounts Receivable Ledger Webster, Co. Webster, Co. 450 $ Matrix, Inc. 200 Total 650 $ Schedule of Accounts Receivable Date PR Debit Credit Balance Jul. 16 1,950 1,950 Jul. 31 1,300 650 General Ledger Accounts Receivable
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Some customers may not pay their account. Uncollectible amounts are referred to as bad debts. Valuing Accounts Receivable
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Bad Debts Expense Bad debt expense is recognized as a cost of doing business, so is classified as a selling expense. Two ways to account for bad debts expenses: the direct write-off method. the allowance method.
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Matching Principle vs. Materiality Principle Matching requires expenses to be reported in the same accounting period as the sales they help produce. Materiality states that an amount can be ignored if its effect on the financial statements is unimportant to users’ business decisions.
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On August 4, 2007 Barton determines it cannot collect $350 from Martin, Inc., a credit customer, for the sales made in 2006.
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Chapter 9s (1) - Chapter 9 Accounting for Receivables...

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