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12 Cards in this Set
- Front
- Back
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types of Receivables |
accounts notes other |
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accounts receivable |
amounts customers owe on account. They result from the sale of goods and services. Companies generally expect to collect accounts receivable within 30 to 60 days. They are usually the most significant type of claim held by a company. |
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Notes Receivable |
written promise (as evidenced by a formal instrument) for amounts to be received. The note normally requires the collection of interest and extends for time periods of 60-90 days or longer. |
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Recognizing accounts receivable-- sale on account |
DR: Accounts receivable--company CR: Sales Revenue
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Recognizing accounts receivable-- returned mercy |
DR: Sales Returns and Allowances CR:Accounts receivable |
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Recognizing accounts receivable-- record collection of account rec. |
DR:Cash DR:Sales discounts (if applicable) CR:account receivable |
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bad debt expense |
loss due to people not paying for merchandise |
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direct-write-off method |
DR: bad Debt expense CR: account receivable (name)
unless a company expects bad debt losses to be insignificant, the direct write-off method is not acceptable for financial reporting purposes. |
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allowance method |
accounting for bad debts involves estimating uncollectible accounts at the end of each period. This provides better matching of expenses with revenues on the income statement. It also ensures that receivables are stated at their cash (net) realizable value on the balance sheet. |
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three features of allowance method |
. Companies estimate uncollectible accounts receivable and match them against revenues in the same accounting period in which the revenues are recorded.2. Companies record estimated uncollectibles as an increase (a debit) to Bad Debt Expense and an increase (a credit) to Allowance for Doubtful Accounts through an adjusting entry at the end of each period. Allowance for Doubtful Accounts is a contra account to Accounts Receivable.3. Companies debit actual uncollectibles to Allowance for Doubtful Accounts and credit them to Accounts Receivable at the time the specific account is written off as uncollectible.
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allowance method in the books |
DR: Bad expense CR: allowances for doubtful accounts
A write-off affects only balance sheet accounts |
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recovery of an uncollectable
add back to allowance for DA??? |
cash accounts receivable for (name) |
