A/R Flashcards
Accounts receivable
Debit balance account
Increase w debits
Decrease w credits when cash received
Sales discounts what to record at time of sale? Gross method
Gross method record 100 percent of the sale
D acct Rec
C sales
If the buyer takes the discount when gross method was used then the JV will
D cash
D sales discount taken for the amount of the discount
C accounts receivable
Discount net method
Sale is recorded w the discount
You calculate the discount and net it out before recording the accounts receivable journal entry
Bad debt
Percent of sales allowed
Percent of receivables allowed
Direct write off method not allowed!
JV accts receivable
D accounts receivable
C allowance for doubtful accounts
Order to calculate bad debt expense
1 take percent of acct rec expected to be bad - this is the ending balance allowance for doubtful accounts
2 review allow for doubtful account begin balance
3 use the two to back into bad debt expense
Bad debt expense JV
D bad debt expense
C allowance for doubtful accounts
Allowance for doubtful accounts
Asset account - contra asset
Balance sheet
Natural credit balance
Write off when account is deemed uncollectible - do a formal write off on the balance sheet, won’t involve income statement at all
D allowance for doubtful accounts
C accounts receivable
A/R factoring
Factoring to a bank to get income from your sales on credit now instead of later
Factoring - you remove the accounts receivables from the books
D cash received now from the bank
D hold back from the factoring (holding in case of sales returns)
D factoring fees- loss on receivables
C acct receivables to remove from the books
With and without recourse
With recourse means you also have to account for people who default on their debt
With recourse
Do the factoring and D cash for the normal amount to be received, C acct Rec
But also figure the recourse liability and add that amount as a D to loss on factoring and a C to recourse liability
Assigned acct rec
Acct rec used as collateral- acct rec stay on the books, but are moved to an account labeled assigned accounts receivable
Pledging of accts receivable
Instead of some of the acct rec being designated, ALL of acct rec are pledged
Still stay on books, no reclassification JV, requires a footnote
Discounting a note
1 calculate interest lender would have earned - this would be annual interest
2 calculate interest bank will earn at their rate ( use the updated face amount from number 1) times the amount of time they will have the note
3 bank will give lender the face amount of the note and the remaining interest the lender can earn for the time they held it
Gross method acct rec
D receivables
C sales
No entry for possible discount on gross method
JV if buyer takes the discount under gross method
D cash
D sales discount for the amt of the discount
C accounts receivable (always have to clear AR)
JV acct receivable net method
D acct receivable
C sales
The acct rec amount is net of the discount because we are expecting the discount
JV acct rec if net method and discount not taken
D cash
C acct rec
C sales discount not taken
We thought they would take the discount and they didn’t
Net method - no mention of the discount in the original recording
Yes - you just bet it from acct rec before recording it
