Chapter 09

Chapter 09 - ACCOUNTING FOR RECEIVABLES Chapter 9 ACCOUNTS...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
ACCOUNTING FOR RECEIVABLES Chapter 9
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
McGraw-Hill/Irwin Slide 2 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.
Background image of page 2
McGraw-Hill/Irwin Slide 3 SALES ON CREDIT Date PR Debit Credit Balance Jun 30 1,000 1,000 Jul 1 720 280 CompStore Date PR Debit Credit Balance Jun 30 2,000 2,000 Jul 1 950 2,950 Accounts Receivable Ledger RDA Electronics RDA Electronics 280 $ CompStore 2,950 Total 3,230 $ Schedule of Accounts Receivable Date PR Debit Credit Balance Jul 1 3,230 3,230 General Ledger Accounts Receivable
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
McGraw-Hill/Irwin Slide 4 Some customers may not pay Some customers may not pay their account. Uncollectible their account. Uncollectible amounts are referred to as bad amounts are referred to as bad debts. There are two methods of debts. There are two methods of accounting for bad debts: accounting for bad debts: Direct Write-Off Method Direct Write-Off Method Allowance Method Allowance Method VALUING ACCOUNTS RECEIVABLE
Background image of page 4
McGraw-Hill/Irwin Slide 5 On January 23 rd , TechCom determined that it can not collect $520 owed by its customer, J. Kent. DIRECT WRITE-OFF METHOD DR CR Jan 23 Bad Debts Expense 520 Accounts Receivable - J. Kent 520 To write-off uncollectible account
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
McGraw-Hill/Irwin Slide 6 RECOVERING A BAD DEBT Although uncommon, sometimes an account written off is later collected. How should we prepare the journal entries? On March 11 th , J. Kent was able to make full payment to TechCom for the amount previously written-off.
Background image of page 6
McGraw-Hill/Irwin Slide 7 DIRECT WRITE-OFF METHOD DR CR Mar 11 Accounts Receivable - J. Kent 520 Bad Debts Expense To reinstate account previously written-off Mar 11 Cash Accounts Receivable - J. Kent To record payment on account
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
McGraw-Hill/Irwin Slide 8 DIRECT WRITE-OFF METHOD What accounting principle would be violated with the direct write-off method? How can the matching principle be complied with under the circumstances? The Allowance Method uses estimation of uncollectible A/R to reflect Bad Debts Expense in the proper period and is required under GAAP
Background image of page 8
McGraw-Hill/Irwin Slide 9 MATCHING VS. MATERIALITY Matching requires expenses to be reported in the same accounting period as the sales they help produce. 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. Materiality states that an amount can be ignored if its effect on the financial statements is unimportant to users’ business decisions.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
McGraw-Hill/Irwin Slide 10 ALLOWANCE METHOD At the end of each period, record an estimate of the uncollectible accounts.
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/12/2012 for the course BUSI 1002 taught by Professor Liu during the Winter '10 term at HKU.

Page1 / 35

Chapter 09 - ACCOUNTING FOR RECEIVABLES Chapter 9 ACCOUNTS...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online