ch 7: accounting for reciveables Flashcards
accts recieveable
amounts due from customers for credit sales
credit card expenese D or C
D
recording transcation with credit card
1- D cash
D credit card expense
C total sales
2- D cost of goods sold
C merchandise inventory
what does cost of goods sold/merchandise inventory represent
how much goods had actually cost
control account
single total accts recievable account
accts receievable ledger
a supplementary record had sep acc for each customer
bad debts expense
accounts of customers who did not pay what they have promised to pay from their receivable
schedule of acts rec
sum of the individual accounts in the subsidiary
ledger equals the balance of the Accounts Receivable account in the general ledger
credit card sales advantages
-eliminates companys need to ecaluate each customer credit standing
-avoids seller risk
-seller recieves cash than when they grant credit directly
-more credit optionas potentially increase sales
2 method for uncollectiable accs
-direct write off
-allowance method
direct write off method definition
method that records the loss from an uncollectivale acc receivable at the time it is determined to be uncollectible
entry for direct write off
D- bad debts expense
C- accts reciveable
what entry if an account that has been written off is recorded later
D-cash
C-accts reciveable
total entry for write off + collected
1- D bad debts
C acct rec
2- D Acc rec
C bad debts
3- D Cash
C acct rec
allowance method
mathces. the estimated loss from the uncollectible agaisnt the sales they helped produce
(requires estimate of the total bad debts expcted from a period)
allowance method advanatages
-records estimated bad debts expense in the period when the related sales are recorded
2-reports accounts receiavle on the balance sheet at the amt to be collected
allowance for doubtful accounts
contra asset acct with balance approximating uncollectibale accts rec
entry for record bad debts expense (allowance method)
D-bad debts expense
C- allowance for doubtful accounts
entry for when an account actually becomes uncollectible
D-allowance for doubtful acc
C-acct recievable
full entry allowance method (estimate uncollectible, become uncollectibale, collected)
D-bad debts expense
C- allowance for doubtful accounts
D-allowance for doubtful acc
C-acct recievable
D-Acc rec
C- allowance for doubful acc
D-cash
C-acc recievable
percent of sales method
assume that a percent of credit sales for the period is uncollectible
(same bad debts allowance method)
percent of receivables method
assumes that a percent of companys receivble is uncollectable
note
written promise to pay a specificed amount either on demand or at a future date
principle of the note
the amount specifieced to pay
interest
charge of using money till its due
maturity date of note
the day the note must be repaid
ex: 90 day note dated july 10 (how do you find maturity date)
Julydays(31)-date of note (10)
=21+ (31) august +30(sept)
days to equal 90 days = october 8
how to calculate interest
principal X interest rate X time in fraction
recording notes rec
D-notes rec
C-sales
interest revenue vs interest reciebale
reciable- interest earned during said time period
revenue- interest earned from the resy of the priod
entry if one dishonors a note
D-acc rec
C-interest revenue
C-interest rec
C-notes rec
first entry honoring dishonoring notes
D- notes rec
C-sales
D-interest rec
C-interest rev
how to record if one honors the note
D-cash
C-interest rev
C-interest rec
C-notes rec
how to do entry if one honors the note and it is wirtten off (allowance method)
D-allowance for d
C-acc rec
goal of the accounts receivable methods is to adjust the Allowance for Doubtful Accounts balance so that
The adjusted balance is equal to the estimate of the uncollectible accounts receivable
Bad Debts Expense for the current year.
allowance for doubt (current)
+ write off
-allowance for doubt (previous)
