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15 Cards in this Set
- Front
- Back
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Recievables
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Represent a company's claims to future collection of cash, other assets, or services.
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Accounts Receivable
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Receivables resulting from the sale of goods or services on account.
Referred to as trade receivables. |
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Accounts Receivables are current assets because
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They will be converted to cash within the normal operating cycle.
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When are revenue and related AR recognized
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At the point of delivery of the product or service
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Accounts Receivable are
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Informal credit arrangements supported by an invoice and normally are due in 30 to 60 days after the sale.
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The typical AR is valued at
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The amount expected to be recieved, not the present value of that amount.
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APB Opinion 21
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Specifically excludes AR from the general rule that recievables be recorded at present value.
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Trade discounts
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Percentage reduction from the list price.
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Cash discounts
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Reduce the amount to be paid if remittance is made within a specified short period of time.
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Gross Method
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For the buyer, views a discount not taken as part of the cost of inventory. For seller, views a discount not taken by the customer as part of sales of revenue
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Net Method
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For the buyer, considers the cost of inventory to include the net, after-discount amount, and any discounts not taken are reported as interest expense. For the seller, considers sales revenue to be the net amount, after discount, and any discounts not taken by customer as interest revenue.
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By either net or gross method...
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Sales is reduced by discounts not taken
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Discounts not taken are
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Included in sales revenue using the GROSS method
Included in interest revenue using the net method. |
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Recognizing sales returns when they occur could...
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Result in an overstatement of income in the period of the related sale.
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Sales Return
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The return of merchandise for a refund or for credit to be applied to other purchases.
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