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INTERMEDIATE ACCOUNTING 1 > (C4) ACOUNTS RECEIVABLE > Flashcards

(C4) ACOUNTS RECEIVABLE Flashcards

1
Q

These are financial assets that represent a contractual right to receive cash or another financial asset from another entity.

A

Receivables

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2
Q

This refers to claims arising from sale of merchandise or services in the ordinary course of business.

A

Trade receivables

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3
Q

TRUE OR FALSE. Trade receivables include accounts receivable and notes receivable.

A

TRUE

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4
Q

These are open accounts arising from the sale of goods and services in the ordinary course of business and not supported by promissory notes.

A

Accounts receivable

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5
Q

These are those supported by formal promises to pay in the form of notes.

A

Notes receivable

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6
Q

These represent claims arising from sources other than the sale of merchandise or services in the ordinary course of business.

A

Non-trade receivables

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7
Q

TRUE OR FALSE. Other names of accounts receivable are customer’s accounts, trade debtors, and trade accounts receivable.

A

TRUE

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8
Q

Trade receivables which are expected to be realized in cash within the normal operating cycle or one year are classified as?

A

Current assets

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9
Q

Non-trade receivables which are expected to be realized in cash within one year, notwithstanding the length of the operating cycle are classified as?

A

Current asset

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10
Q

If a non-trade receivable is collectible beyond one year, it is classified as?

A

Non-current asset

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11
Q

TRUE OR FALSE. Trade and non-trade receivable shall be presented separately on the face of the SFP.

A

FALSE. It must be presented as a one-line item called trade and other receivables.

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12
Q

TRUE OR FALSE. The details of the total trade and other receivables shall be disclosed in the notes to financial statements.

A

TRUE

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13
Q

TRUE OR FALSE. A customer can have credit balances due to overpayment, returns and allowances, and advanced payments from customers.

A

TRUE

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14
Q

Customers with credit balances are classified as?

A

Current liabilities

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15
Q

TRUE OR FALSE. Customers with credit balances can be offset against the debit balances in other customer’s account.

A

FALSE. It cannot be offset.

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16
Q

What is the initial measurement of a FINANCIAL ASSET?

A

At fair value plus transaction costs directly attributable to the acquisition

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17
Q

Accounts receivable are measured initially at?

A

Face amount or original invoice amount

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18
Q

TRUE OR FALSE. In accounts receivable, transaction costs are not normally incured because the account simply arise from the act of selling goods in the ordinary course of business.

A

TRUE

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19
Q

Accounts receivable are measured subsequently?

A

At amortized cost

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20
Q

What is the amortized cost of an accounts receivable?

A

Net realizable value

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21
Q

It is the amount expected to be collected or the estimated recoverable amount.

A

Net realizable value

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22
Q

TRUE OR FALSE. Assets can be carried out above their recoverable amount.

A

FALSE. Assets shall not be carried at above their recoverable amount.

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23
Q

What are the four deductions which are made in estimating the NRV of a trade accounts receivable?

A
  1. Allowance for freight charge
  2. Allowance for sales return
  3. Allowance for sales discount
  4. Allowance for doubtful accounts
24
Q

This means that the ownership of the goods purchased is vested in the buyer upon receipt thereof.

A

FOB destination

25
Q

TRUE OR FALSE. In FOB destination, the buyer must be responsible for the freight charge after the point of destination.

A

FALSE. It must be the seller.

26
Q

This means that ownership of the goods purchase is vested in the buyer upon shipment thereof.

A

FOB shipping point

27
Q

This means that the freight charge on the goods shipped is not yet paid. The common carrier shall collect the same from the buyer. The fried charge is actually paid by the buyer.

A

Freight collect

28
Q

This means that freight charge on the goods ship is already paid by the seller.

A

Freight prepaid

29
Q

TRUE OR FALSE. The measurement of accounts receivable should also recognize the probability that some customers will return goods that are unsatisfactory.

A

TRUE

30
Q

What is the journal entry to recognize the probable sales return?

A

Dr. Sales return
Cr. Allowance for sales return

31
Q

TRUE OR FALSE. Businesses use cash discounts for the reason of prompt payment.

A

TRUE

32
Q

It is known as sales discount on the part of the seller and a purchase discount on the part of the buyer.

A

Cash discount

33
Q

How do you read a cash discount that may be expressed as 5/10, n/30.

A

A customer is entitled for a 5% discount if payment is made within 10 days. Otherwise, The gross amount of the invoice must be paid within 30 days from the invoice date.

34
Q

What are the two methods of recording credit sales?

A
  1. Gross method
  2. Net method
35
Q

The accounts receivable and sales are recorded at gross amount of the invoice. It is the common and widely used method because it is simple to apply.

A

Gross method

36
Q

The accounts receivable and sales are recorded at net amount of the invoice, meaning the invoice price minus the cash discount whether they can or not taken.

A

Net method

37
Q

TRUE OR FALSE. Under net method, a sales discount forfeited account is used.

A

TRUE

38
Q

TRUE OR FALSE. The sales discount forfeited account is classified as?

A

Other income

39
Q

When an account becomes uncollectible, The entity has sustained?

A

Bad debt loss

40
Q

What are the two methods followed in accounting for the bad debt loss?

A
  1. Allowance method
  2. Direct writeoff method
41
Q

Under the allowance method, what is the journal entry to recognize a doubtful account?

A

Dr. Doubtful accounts
Cr. Allowance for DA

42
Q

TRUE OR FALSE. The allowance for doubtful accounts is an addition to the accounts receivable.

A

FALSE. It is a deduction.

43
Q

Under the allowance method, if the doubtful accounts are subsequently found to be worthless, The journal entry to record the accounts written off is?

A

Dr. Allowance for DA
Cr. Accounts receivable

44
Q

TRUE OR FALSE. GAAP requires the use of allowance method because it conforms with the matching principle.

A

TRUE

45
Q

TRUE OR FALSE. This requires recognition of a bad debt loss only when the accounts proved to be worthless or uncollectible.

A

Direct writeoff method

46
Q

TRUE OR FALSE. The direct writeoff method is generally used and suggested by the IFRS.

A

FALSE. It is not permitted under IFRS. It is mostly used for income tax purposes.

47
Q

Under the direct writeoff method, what is the journal entry to record an account that is doubtful of collection?

A

No entry is necessary.

48
Q

Under the direct writeoff method, what is the journal entry of the accounts are proved to be worthless?

A

Dr. Bad debts
Cr. Accounts receivable

49
Q

Under the direct writeoff method, what is the journal entry to record the accounts that are previously written off as worthless and its collection?

A

Dr. Accounts receivable
Cr. Bad debts

Dr. Cash
Cr. Accounts receivable

50
Q

Under the allowance method, what is the journal entry to record the accounts that are previously written off as worthless and its collection?

A

Dr. Accounts receivable
Cr. Allowance for DA

Dr. Cash
Cr. Accounts receivable

51
Q

If the granting of credit and collection of accounts are under the charge of the sales manager, doubtful accounts shall be considered as?

A

Distribution cost

52
Q

If the granting of credit and collection of accounts are under the charge of an officer other than sales manager, doubtful accounts shall be considered as?

A

Administrative expense

53
Q

In cases wherein there are no statements on whether the granting of credit and collection is under the charge of a sales manager or other personnel, the doubtful account shall be classified as?

A

Administrative expense

54
Q

TRUE OR FALSE. The effect of the recovery of accounts written of zero and the accounts receivable because the recharging and collection are offsetting.

A

TRUE

55
Q

Under the direct writeoff method, if the recovery is subsequent to the year of writeoff, it may simply be credited to what account?

A

Other income

INTERMEDIATE ACCOUNTING 1 (4 decks)

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