Receivables D103

Receivables

claims held against customers and others for money, goods, or services

Current receivables

Expected to be collected within a year or during the current operating cycle, whichever is longer

Noncurrent receivables

Expected to be collected after a year or after the current operating cycle

Trade receivables

Amounts owed by customers for goods sold and services rendered as part of normal business operations.

Accounts receivable

oral promises of the purchaser to pay for goods and services sold

Notes Receivable

written promises to pay a certain sum of money on a specified future date

Nontrade Receivables

amounts a business is owed from sources outside its core operations

How to record initial transaction in the gross method of recording sales discounts

1. Debit Accounts Receivable the Full Amount

2. Credit Sales Revenue the Full Amount

How to record payment in the gross method of recording sales discounts if payment is made during the discount period

1. Debit Cash Sales Discount Amount

2. Debit Sales Discounts Full Amount- Sales Discount Amount

3. Credit Accounts Receivable Full Amount

How to record payment in the gross method of recording sales discounts if payment is made after the discount period

1. Debit cash the full amount

2. Credit Accounts Receivable the Full Amount

How to record initial transaction in the net method of recording sales discounts

1. Debit Accounts Receivable Sales Discount Amount

2. Credit Sales Revenue Sales Discount Amount

How to record payment in the net method of recording sales discounts if payment is made during the discount period

1. Debit Cash the Sales Discount Amount

2. Credit Accounts Receivable the Sales Discount Amount

How to record payment in the net method of recording sales discounts if payment is made after the discount period

1. Debit cash Full amount

2. Credit Accounts Receivable Sales Discount Amount

3. Credit Sales Discounts Forfeited Full Amount - Sales Discount Amount

How to record sales returns and allowances

1. Debit sales returns and allowances

2. Credit accounts receivable

What is sales returns and allowances?

A contra account to sales revenue

At what value do companies record long-term notes receivable?

the present value of the cash they expect to collect

How to Record the Receipt of Non Interest Bearing Notes

1. Debit Notes Receivable the Face Value

2. Credit Discount on Notes Receivable Face Value- Present Value

3. Credit Cash Present Value

When a non-interest bearing note is received for the sale of inventory, what is credited instead of cash?

Revenue

What is the sales returns and allowances account?

A contra-revenue account

What is the sales returns and allowances account deducted from?

Revenue

How to report the return of goods bought on account

Debit Sales returns and allowances

Credit Accounts Receivable

How are sales returns and allowances factored into net sales?

Sales- Sales Returns and Allowances = Net Sales

Accounts Receivable Turnover

This ratio measures the number of times, on average, a company collects receivables during the period.

Accounts Receivable Turnover Equation

Net Sales /Average Net Accounts Receivable

days to collect accounts receivable

365/Accounts Receivable Turnover

How to factor in allowance for doubtful accounts when calculating AR Turnover

Subtract Allowance for Doubtful Accounts from Accounts Receivable

Direct Write-off Method

A method for recording uncollectible receivables where no entry is made until a specific account has been established as uncollectible.

How to record uncollectible accounts under the direct write-off method

Debit bad debt expense

Credit accounts receivable

Allowance method

A method for recording uncollectible receivables where an estimate is made of the expected uncollectible receivables.

How to record estimates for uncollectibles using the allowance method

Debit bad debt expense

Credit Allowance for Doubtful Accounts

How to record the write-off of uncollectible accounts using the allowance method

Debit allowance for doubtful accounts

Credit accounts receivable

How to Record the Recovery of a Written-Off Account

Debit accounts receivable

Credit Allowance for doubtful accounts

Debit cash

Credit Accounts receivable

How to record end of year bad debt expense

Debit bad debt expense required year-end balance minus whatever is already credited in the bad debt expense account (or plus a debit amount)

Credit allowance for doubtful accounts required year-end balance - whatever is already credited in the bad debt expense account (or plus a debit amount)

A _______ represents a negative value in the allowance for doubtful accounts account

Debit

Companies record and report long-term notes receivable at

the present value of the cash they expect to collect.

The present value of a note equals the face value of a note when

The market and stated rates of interest are the same

How to record “interest” for a non - interest bearing note

1. Debit discounts on notes receivable

2. Credit interest revenue

How to record the purchase of an interest bearing note whose face value is equal to present value

Debit notes receivable

Credit cash

How to record interest on an interest bearing note

Debit cash

Credit Interest Revenue