chap 4' accounts receivable Flashcards
it refers to claims arising from sale of merchandise or services in the ordinary course business. it also includes accounts receivable and notes receivable.
trade receivables
are open accounts arising from the sale of goods and services in the ordinary course of business and not supported by promissory notes.
accounts receivable
true or false: other names of accounts receivable are customer’s accounts, trade debtors, and trade accounts receivable.
true
it represents claims arising from sourcez other than sale of merchandise or services in the ordinary course of business.
nontrade receivables
trade receivables which are expected to be realized in cash within the normal operating cycle or one year, whichever is longer, are classied as _?
current assets
non-trade receivables which are expected to be realized in cash within one year, the length of the operating cycle notwithstanding l, are classifed as _?
current assets
if collectible beyond one year, nontrade receivables are classified as _?
noncurrent assets
“an entity shall classify an asset as current when the entity expects to realize the asset or intends to sell or consume it in the entity’s normal operating cycle, or when the entity expects to realize the asset within twelve months after the reporting period.“
pas 1, presentation of financial statements, paragraph 66
trade receivables and nontrade receivables which are currently collectible shall be presented on the face of the statement of financial position as one line item called _?
trade and other receivables
advances to affiliates are _ assets.
noncurrent assets
advances to supplier are _ assets.
current assets
it should be shown preferably as a deduction from subscribed share capital unless collectible currently.
subscriptions receivable. contra-equity
creditors’ accounts with debit balances as a result of overpayment or returns and allowances are classified as _ assets.
current assets
special deposits in contract bids normally are classified as _ assets because such deposits are likely to remain outstanding for a considerable long period of time.
noncurrent asset
dividend receivable, accrued rent receivable, accrued royalties receivable and accrued interest receivable are usually classifed as _ assets.
current assets
claims receivable such as claims against common carriers for losses or damages, claim for rebates and tax refunds are normally classified as _ assets.
current assets
are credit balances in accounts receivable resulting from overpayments, returns, and allowances, and advance payments from customers.
customers’ credit balances
they are classified as current liabilities and are not offset against debit balances in other customer’s accounts, except when the same is not material in which case only the net accounrs receivable may be presented.
customers’ credit balances
true or false: no adjustment is necessary to formally recognize the customers’ credit balancez because ultimately the credit balances are canceled for sales and cash settlement. but an adjustment may be made only for worksheet purposes, meaning, not formally journalizedand posted to the ledger.
true
pfrs _, paragraph 5.1.1, provides that accounts receivable shall be recognized initially at face amount or original invoice amount plus transaction costs that are directly attributable to the acquisition.
pfrs 9, paragraph 5.1.1
true or false: cash flows relating to short-term accounts receivable are not discounted because the effect of discounting is usually immaterial.
true
true or false: with respect to accounts receivable, transaction costs are not normally incurred because the accounts simply arise from the act of selling goods in the ordinary course of business.
true
pfrs _, paragraph 5.2.1, provides that after initial recognition, accounts receivable shall be measured at amortized cost.
pfrs 9, paragraph 5.2.1
it is the net realizable value of accounts receivable.
amortized cost
it is the amount of cash expected to be collected or the estimated recoverable amount.
net realizable value of accounts receivable
true or false: assets should not be carried at above their recoverable amount.
true
in estimating the net realizable value of trade accounts receivable, what accounts should be deducted?
allowance for freight charge, sales return, sales discount, doubtful accounts
ownership of the goods purchased is vested upon the receipt thereof.
fob destination. the seller shall be responsible for the freight charge up to the point of destination.
ownership of the goods purchased is vested in the buyer upon shipment thereof.
fob shipping point. it is incumbent upon the buyer to pay for the transportation charge from the point of shipment to the point of destination.
the freight charge has been paid by the seller in advance before shipment.
freight prepaid
means that freight charge on the goods shipped is not yet paid. the common carrier shall collect the same from the buyer. thus, under freight collect, the freight charge is actually paid by the buyer.
freight collect
entities usually offer _ cash discounts to credit customers. it is a reduction from an invoice price by reason of prompt payment.
cash discounts
true or false: a cash discount may be expressed as 5/10, n/30. this means that the customer is entitled to a 5% discount if payment is made in 10 days from the invoice date. if the customer failed to pay within the 10-day discount period, the gross amount of the invoice price must be paid within 30 days from the invoice date.
true
the accounts receivable and sales are recorded at gross amount of the invoice.
gross method
the accounts receivable and sales are recorded at net amount of the invoice or at the invoice minus the cash discount whether taken or not taken.
net method
the sales discount forfeited account is classified as _?
other income
is simply one of the costs of doing business on credit.
bad debt loss
what are the two methods for bad debt loss?
allowance method and direct writeoff method
if the doubtful accounts are subsequently found to be worthless, the accounts are written off as _?
uncollectible
the effect of the recovery of accounts written off is _ on accounts receivable because the recharging and collection are offsetting.
0
true or false: allowance for doubtful accounts is increased by the recovery.
true
requires recognition of a bad debt loss only when the accounts proved to be worthless or uncollectible.
direct writeoff method
true or false: worthless accountd are recorded by debiting bad debts and crediting accountd receivable. if the accounts are only doubtful of collection, no adjustment is necessary.
true
it is often used by small businesses because it is simple ti apply.
direct writeoff method
as a matter of fact, the bir recognized only this method for income rax purposes.
direct writeoff method
this method violated the matching principle because the debt loss is often recognized in later accounting period than the period in which states the sale revenue was recognized.
direct writeoff method
true or false: direct writeoff method is not permitted under ifrs.
true
if the granting of credit and collection of accounts are under the charge of the sales manager, doubtful accounts shall be considered as _ or _.
distribution or cost selling expense
if the granting of credit and collection of accounts are under the change of an officer other than sales manager, doutbful accounts shall be considered as _.
administrative expense
in the absence of any contrary statement, doubtful accounts shall be classfied as _.
administrative expense
receivables arising from advances to officers and employees, advances to suppliers, and advances to affiliates.
advances
receivables from reimbursable deposits paid to cover potential damages or losses, deposits for guarantee of performance or payment, and deposits for returnable items.
deposits
true or false: trade receivables that do not have a significant financing component are measured at their transaction price in
accordance with PFRS 15.
true
the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected behalf of third parties.
transaction price
fob stands for?
free on board
are given to encourage orders in large quantity or to avoid frequent changes in catalogs, to alter prices of different quantities purchased, or to hide the true invoice price from competitors.
trade discounts
are given to encourage prompt payment.
cash discounts
