Chapter9Outline

Chapter9Outline - CHAPTER REVIEW Types of Receivables 1....

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CHAPTER REVIEW Types of Receivables 1. (S.O. 1) Receivables are claims that are expected to be collected in cash. The three major classes of receivables are usually classified as: (a) accounts, (b) notes, and (c) other. 2. Accounts receivable are amounts owed by customers on account. Notes receivable represent claims for which formal instruments of credit are issued as evidence of debt. And other receivables include nontrade receivables such as interest receivable, loans to company officers, advances to employees, and income taxes refundable. Recognizing Accounts Receivable 3. (S.O. 2) When a business sells merchandise to a customer on credit, Accounts Receivable is debited and Sales is credited. 4. If a payment is received by a customer within the discount period, the following entry is made: Cash. .......................................................................................... XXX Sales Discounts. ........................................................................ XXX Accounts Receivable. ........................................................... XXX Valuing Accounts Receivable 5. (S.O. 3) To ensure that receivables are not overstated on the balance sheet, they are stated at their cash (net) realizable value. Cash (net) realizable value is the net amount expected to be received in cash. 6. In accounting, credit losses are debited to Bad Debts Expense or Uncollectible Accounts Expense. Such losses are considered to be a normal and necessary risk of doing business. Two methods are used in accounting for uncollectible accounts: (a) the allowance method and (b) the direct write-off method. 7.
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Chapter9Outline - CHAPTER REVIEW Types of Receivables 1....

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