CHAPTER 8 - CHAPTER 8 - receivables: amounts due from...

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CHAPTER 8 - receivables: amounts due from individuals and companies - they are claims that are expected to be collected in cash - one of companies largest and most liquid assets - accounts receivable are amounts customers owe on account from sale of goods and services. Usually collected 30-60 days, most impt claim held by a company - notes receivable: claims for which formal instruments of credit are issues as evidence by debt. Requires debtor to pay intrest and extends for time periods of 60-90 days. - Trade receivables: a/r and n/r that results from sale transactions - Other receivables: nontrade receivables such as interest, loans to company, advances to employees. Results from operations of business. Recognizing accounts receivable: - ex: polo sells merchandise on account terms 2/10 n/30 o A/R: debit 1000. Sales revenue credit 1000 - 100 dollars of goods are returned o SR an A: debit 100, a/r, credit 100 - customer returns goods on time for discount o cash (882) and sales discounts (18) debit, credit A/R 900 - when you use retailer’s credit card, retailer carges interest on balance due if not paid within a specified period (usually 25-30) - ex: sell someone 300 bucks of stuff on credit card. Debit A/R and credit sales revenue - at end of month assuming you owe 300, company charges 1.5 percent of interest per month, (300*1.45%) = 4.5 - A/R= 4.5, interest revenue = 4.5 Valuing A/R - report A/R on balance sheet, - sometimes receivables are uncollectable - losses that result from extending credit are Bad Debt expenses, normal and necessary for business. Direct Write of Method - company debts bad debt expense and credits a/r - only show actual losses from uncollectables - recorded in a period different from the period in which revenue is recorded.
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This note was uploaded on 12/14/2011 for the course ACCOUNTING 100 taught by Professor 1 during the Fall '11 term at Wisconsin.

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CHAPTER 8 - CHAPTER 8 - receivables: amounts due from...

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