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15 Cards in this Set

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  • Back
Represent a company's claims to future collection of cash, other assets, or services.
Accounts Receivable
Receivables resulting from the sale of goods or services on account.

Referred to as trade receivables.
Accounts Receivables are current assets because
They will be converted to cash within the normal operating cycle.
When are revenue and related AR recognized
At the point of delivery of the product or service
Accounts Receivable are
Informal credit arrangements supported by an invoice and normally are due in 30 to 60 days after the sale.
The typical AR is valued at
The amount expected to be recieved, not the present value of that amount.
APB Opinion 21
Specifically excludes AR from the general rule that recievables be recorded at present value.
Trade discounts
Percentage reduction from the list price.
Cash discounts
Reduce the amount to be paid if remittance is made within a specified short period of time.
Gross Method
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
Net Method
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.
By either net or gross method...
Sales is reduced by discounts not taken
Discounts not taken are
Included in sales revenue using the GROSS method

Included in interest revenue using the net method.
Recognizing sales returns when they occur could...
Result in an overstatement of income in the period of the related sale.
Sales Return
The return of merchandise for a refund or for credit to be applied to other purchases.