Chapter8studyobjectives - 1 Identify the different types of...

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1   Identify the different types of receivables. Receivables are frequently classified as (1) accounts, (2) notes, and (3) other. Accounts receivable are amounts customers owe on account. Notes receivable are claims for which lenders issue formal instruments of credit as proof of the debt. Other receivables include nontrade receivables such as interest receivable, loans to company officers, advances to employees, and income taxes refundable. 2   Explain how companies recognize accounts receivable. Companies record accounts receivable at invoice price. They are reduced by sales returns and allowances. Cash discounts reduce the amount received on accounts receivable. When interest is charged on a past due receivable, the company adds this interest to the accounts receivable balance and recognizes it as interest revenue. 3   Distinguish between the methods and bases companies use to value accounts receivable. There are two methods of accounting for uncollectible accounts: the allowance method and the direct write-off method. Companies may use either the percentage-of-sales or the percentage-of-receivables basis to estimate
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This note was uploaded on 10/21/2011 for the course ACCT 272 taught by Professor Mensah during the Fall '08 term at Rutgers.

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