8.1 Reporting Recievbale Flashcards
how do credit losses occur
when customers dont pay accounts receivable
what is a receivable
amounts that are owed to a company by its customers, employees, the govt, and others
3 charactersistics of a recievable
1) expected to be collected in cash
2) the management of recievables is important for companies that sell on credit
3) receivables are considerd financial assets
what are financial assets
a contractual right to recieve cash or another financial asset
why do we care so much about recievables
because they represent some of the most liquid assets
3 types of receivables
A/R
N/R
Other
A/R
-owed by customers
-result from a sale on account
-collected w/n 30-60 days and are subject to credit terms
N/R
written promises to repay debt
they require payment of interest and due >30 days
are notes receiveable current asset or nca
depends on when they are due
a/r and n/r that result from sales transactions are called what
trade receivacbles
what are other receivables
-non trade receivables
-do not result form normal operations of business
EX: interest receivable, loans to company officers, advances to employees, sales tax recoverable, income tax receivable etc
When is a receivable recorded for a service company
when a service is provided on account
When is a receivable recorded for a merchandising company
at the pos of merchandise on account
How do we record accounts receivable
-initially at their transaction price (Dr A/R for the full amount)
-And then reduce the transaction price by variable consideration (CR Sales and then also the % of refund liability)
how do large companies manage all their acccounts receibable
in a subsidiary ledger (so accounts dont get mixed up)
what is a subsidiary ledger/subledger
manages detailed info that would be hard to track in a general ledger account
-> account detail for each of a companys customers
how is a subledger linked to the rest of the general ledger?
by a single general ledger account (so A/R)
In the subledger, you have diff accounts for all the customers, and then you sum up all the A/R into one A/R account
In the subledger, you have diff accounts for all the customers, and then you sum up all the A/R into one A/R account
In the subledger, you have diff accounts for all the customers, and then you sum up all the A/R into one A/R account
an entry cannot be made to a control account without making an entry in the subsidiary ledger, nor can an entry be made in the subsidiary ledger without making a corresponding entry in the control account.
!!! subledger entry = control account entry
what accounts have subledgers?
a/r, inventory, a/p, payroll
subledger link with general ledger?
all debits summed up in genledg and all credits summed up in genledg
when filling out the sub ledger, do you do it in someones perspective?
NNO!!! you do it in the reglar way of accounts receivable (dr increase and cr decrease)
