Chap 9 Outline[1]

Chap 9 Outline[1] - Chapter Outline I. Accounts...

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Chapter Outline Notes I. Accounts Receivable— Amounts due from customers for credit sales. They occur when a customer uses credit cards issued by third parties and when a company gives credit directly to customers. A. Recognizing Accounts Receivable: 1. Sales on credit—Increase (debit) Accounts Receivable for the full amount of the sale and increase (credit) Sales. a. The General Ledger continues to keep a single (total) accounts receivable. b. A supplementary record, called the Accounts Receivable (subsidiary) Ledger, maintains a separate account receivable for each customer. c. A Schedule of Accounts Receivable shows that the sum of the individual accounts in the subsidiary ledger equals the debit balance of the Accounts Receivable account in the general ledger. 2. Credit card sales (Examples: Visa, MasterCard, American Express). a. advantages: (1) eliminates the company’s need to evaluate each customer’s credit standing (2) avoids seller’s risk (3) seller receives cash sooner than when they grant credit directly (4) more credit options potentially increase sales. b. Credit card sales (when cash is received upon deposit of sales receipt) results in debit to Cash for the amount of sale less the credit card company charge, debit to Credit Card Expense for this fee and credit to Sales for full invoice amount. c. Credit card sales (when cash receipt is delayed until payment is made by credit card) results in debit to Accounts Receivable for the amount to be collected, and a debit to Credit Card expense for the amount of the fee and credit to Sales for full invoice. Later, when payment is received, debit Cash and credit Accounts Receivable. B. Installment Sales and Receivables Amounts owed by customers from credit sales where payment is required in periodic amounts over an extended time period. 1. Customer is usually charged interest.
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This note was uploaded on 08/29/2011 for the course ACCT 106 taught by Professor A during the Spring '11 term at Ohio State.

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Chap 9 Outline[1] - Chapter Outline I. Accounts...

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