Professional Documents
Culture Documents
RECEIVABLES
LECTURE NOTES
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OVERVIEW
Types of Receivables
8-3 LO 1
Accounts Receivable
ABC Corporation
Statement of Financial Position (partial)
Current Assets:
Supplies € 40
Inventory 812
Accounts receivable 500
Less: Allowance for doubtful accounts (25) 475
Cash 330
Total current assets 1,657
8-4 LO 3
Accounts Receivable
Alternate
ABC Corporation Presentation
Statement of Financial Position (partial)
Current Assets:
Supplies € 40
Inventory 812
Accounts receivable, net of €25 allowance 475
Cash 330
Total current assets 1,657
8-5 LO 3
ACCOUNTS RECEIVABLES
End of
period
Dispose an
Starting
AR
Valuing Uncollectible Accounts Receivable
8-7 LO 3
DIRECT WRITE-OFF METHOD FOR
UNCOLLECTIBLE ACCOUNTS
Theoretically undesirable:
No matching.
Receivable not stated at cash realizable value.
Not acceptable for financial reporting.
8-8 LO 3
ALLOWANCE METHOD FOR UNCOLLECTIBLE
ACCOUNTS
1. At the end of period , Companies estimate uncollectible
accounts receivable (- 2 methods of estimates later on)
8-10 LO 3
Allowance Method for Uncollectibles
Illustration 8-3
Presentation of allowance for doubtful accounts
8-11 LO 3
Allowance Method for Uncollectibles
Illustration 8-4
General ledger balances after write-off
8-12 LO 3
Allowance Method for Uncollectibles
Illustration 8-5
8-13 Cash realizable value comparison LO 3
Allowance Method for Uncollectibles
LO 3
Allowance Method for Uncollectibles
LO 3
Allowance Method for Uncollectibles
Management estimates
what percentage of credit
sales will be uncollectible.
This percentage is based
on past experience and
anticipated credit policy.
LO 3
Allowance Method for Uncollectibles
Percentage-of-Sales
Illustration: Assume that Gonzalez SA elects to use the
percentage-of-sales basis. It concludes that 1% of net credit sales
will become uncollectible. If net credit sales for 2017 are
€800,000, the adjusting entry is:
LO 3
Allowance Method for Uncollectibles
Management establishes a
percentage relationship
between the amount of
receivables and expected
losses from uncollectible
accounts.-- AGING AR
LO 3
Allowance Method for Uncollectibles
Allowance
Direct write off
method 2
method
stages:
1. Estimates
2. Use
allowance at Non-GAAP
allowances for
the end of (unacceptable)
AR
period
% of AR
% of Sales
(aging AR)
DISPOSAL OF AN A.R
8-21
9 - 22
Selling Pledging
Receivables Receivables
9-22
Disposing of Accounts Receivables
SALE OF RECEIVABLES
Finance company or bank-- FACTOR COMPANIES.
8-23 LO 4
9 - 24
8-25 LO 4
EXERCISES
Notes Receivable
Learning Objective
5
Companies may grant credit in exchange Compute the maturity
date of and interest on
for a promissory note. A promissory note notes receivable.
LO 5
Notes Receivable
Illustration 8-11
Promissory note LO 5
OTHER SAMPLE OF NOTES
RECEIVABLE
C2
9-30
Determining the Maturity Date
LO 5
Computing Interest
Illustration 8-14
Formula for computing interest
When counting days, omit the date the note is issued, but
include the due date.
Illustration 8-15
Computation of interest
LO 5
Valuing Notes Receivable
Learning Objective
Report short-term notes receivable at 7
Describe how
their cash (net) realizable value. companies value notes
receivable.
LO 7
Disposing of Notes Receivable
Learning Objective
1. Notes may be held to their maturity date. 8
Describe the entries to
record the disposition of
2. Maker may default and payee must make notes receivable.
LO 8
Disposing of Notes Receivable
LO 8
HONOR OF NOTES RECEIVABLE
LO 8
DISHONOR OF NOTES RECEIVABLE
LO 8
EXERCISES
Statement Presentation
Learning Objective
Presentation 9
Explain the statement
presentation and analysis
Identify in the statement of financial of receivables.
LO 9
ADDITIONAL –
CREDIT CARD SALES
8-40
Credit Card Sales
8-41
9-41
Credit Card Sales
8-42
9-42
Credit Card Sales
8-43
9-43