Revenues and Receivables

Financial Statements

Balance Sheet, Income Statement, Statement of Cash Flows

Accrual Accounting

Recording transactions when they occur, regardless of when cash is exchanged

T-Accounts

Visual representation of accounts used in double-entry bookkeeping

Adjustments

Entries made at the end of an accounting period to ensure accuracy

Accounts Receivable

Amounts owed to a company by its customers for goods or services

Inventory

Goods held by a company for sale or production

Property, Plant and Equipment (PP&E)

Tangible assets used in the production of goods or services

Time Value of Money

Concept that money available today is worth more than the same amount in the future

Bonds

Debt securities issued by companies or governments to raise capital

Shareholder's Equity

The residual interest in the assets of a company after deducting liabilities

Sales Discounts to Businesses

Discounts offered to encourage prompt payment of a receivable

Sales Returns and Allowances

Recording when goods are returned by customers

Credit Sales to Customers

Sales made on credit to customers

Sales Revenue

Revenue generated from the sale of goods or services

IFRS

International Financial Reporting Standards

US GAAP

Generally Accepted Accounting Principles used in the United States

Sales Amount

Total amount of a sale

Discount Percentage

Percentage of the sales amount that is discounted

Maximum Credit Period

The maximum number of days a customer has to pay the remaining balance

Cash

Physical currency or money in a bank account

Sales Discount

Reduction in the sales amount given to a customer for prompt payment

Accounts Receivable Journal Entry (US GAAP)

Debit Accounts Receivable, Credit Sales Revenue

Sales Revenue Journal Entry (IFRS)

Debit Accounts Receivable, Credit Sales Revenue

Payment within Discount Period

Customer pays the remaining balance within the discount period

Sales Returns

Goods returned by customers

Allowance for Doubtful Accounts

Contra-asset account used to reduce the book value of Accounts Receivable

Estimation of Uncollectible Accounts

Estimating the amount of Accounts Receivable that will not be collected

Write-offs

Removing uncollectible Accounts Receivable from the books

Credit Card Sales to Consumers

Sales made to consumers using credit cards

Credit Card Fees

Transaction fees charged by credit card companies

Bank Charges

Fees charged by banks for services provided

Group Exercise: Sales

Activity involving journal entries for various sales transactions

Valuing Accounts Receivable

Determining the worth of outstanding Accounts Receivable

Bad Debt Expense

Expense associated with uncollectible Accounts Receivable

Allowance Method

Method of accounting for estimated bad debt expense and reducing the book value of Accounts Receivable

Matching Principle

Expenses should be recognized in the same period as the revenue they help generate

Aging of Receivables Method

Method of estimating uncollectible Accounts Receivable based on the age of the accounts

Percentage of Credit Sales Method

Method of estimating bad debt expense based on a percentage of credit sales

Recovery of an Uncollectible Account

Collection of an account previously written off as uncollectible

Earnings Management

Manipulation of financial statements to meet targets or expectations

Red Flags with Accounts Receivable

Indicators of potential issues with the collection of Accounts Receivable