Chapter 9 receivables and payables
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24 Terms
Accounts Receivable
Liquid current assets that a company expects to collect within 30-60 days
What are the two ways bad debt can be accounted for
The direct write-off method; the allowance method
what is bad debt also called
Uncollectible Accounts Expense
Direct write off method is a __
write off when an AR becomes uncollectible
Does the Direct write off method violate the matching principle?
yes
What is the journal entry for write off method
Bad debt debited, accounts receivable credited
The allowance method_____
better matches revenues with expenses
what contra asset account does the allowance method use
allowance for doubtful accounts
What are the two methods for the allowance method
Aging of AR; % of sales
How to calculate credit sales for % of sales method
total sales - cash sales = credit sales
how to calculate bad debt for % of sales method
credit sales x percentage = bad debt expense
What is the journal entry for % of sales method
Bad debt is debited, allowance account is credited
How to calculate Net
accounts receivable - allowance account
For aging of receivables is the ending balance debited or credited
credited
How to calculate ending balance for allowance (aging of receivables)
Amount receivable x estimated uncollectable
How to calculate interest bearing notes
interest = principle x rate x time
what is the rate of notes receivable
annual percentage
what is the rate of notes receivable
annual percentage
what is time on interest bearing notes
days/ 360 or months/ 12
what is the calculation for a discount note receivable
maturity value x discount rate x discount period
how to calculate the proceeds for discounting a note receivable
maturity value - discount
what is the journal entry for note payable
debit cash, credit note payable
what is the journal entry for interest payable
Interest expense debited, interest payable credited
what is the journal entry for paying interests and notes
interest expense, interest payable, note payable debited, cash credited