Chapter 10 Accounts Receivable Flashcards
Receivables are financial assets that represent ___________ from another entity
a contractual right to receive cash or another financial asset
For retailers or manufacturers, receivables are classified into ___ and ___
Trade Receivables, Nontrade Receivables
Trade Receivables refer to claims arising from _____ in the _____. They include ____ and _____.
the sale of merchandise or services, ordinary course of business, A/R, N/R
Other names of A/R are ___, ____, and ___
customers’ accounts, trade debtors, trade accounts receivable
Notes Receivable are those supported by ___ to pay in the form of ____
formal promises, notes
Nontrade Receivables represent claims arising from sources ____ in the ordinary course of business
other than the sale of merchandise or services
For banks and other financial institutions, receivables result primarily from ___ to customers
loans
Trade receivables which are expected to be realized in cash within the ___ or ___, whichever is ___, are classified as current assets.
normal operating cycle, one year, longer
Nontrade receivables which are expected to be realized in cash within __, the length of the _____, are classified as current assets
one year, operating cycle notwithstanding
If collectible beyond ___ nontrade receivables are classifed as noncurrent assets
one year
Trade receivables and nontrade receivables which are currently collectible shall be presented on the face of the statement of financial position as ___ called ____. However, details of the total trade and other receivables shall be ____
one line item, trade and other receivables, disclosed in the ntoes to financial statements
Examples of nontrade receivables
Advances to/Receivables from shareholders, directors, officers, or employees; Advances to Affiliates; Advances to Supplier for the Acquisition of Merchandise; Subscriptions Receivable; Creditors’ Accounts that have Debit Balances as a result of Overpayment or Returns and Allowances; Special Deposits on Contract Bids; Accrued income (Dividends Receivable, Accrued Rent Income, Accrued Royalties Income, and Accrued Interest on Bond Investment); Claims Receivable (Claims against Common Carriers for losses or damages, Claim for Rebates and Tax Refunds, Claims from Insurance Entities)
If collectible in one year, advances to/receivables from shareholders, directors, officers, or employees should be classified as ____. Otherwise, such advances/receivables are classified as ____
current assets, noncurrent assets
Advances to Affiliates are usually treated as ____
long-term investments
Advances to Supplier for the Acquisition of Merchandise are _____
current assets
Subscriptions Receivable are current assets if _____. Otherwise, subscriptions receivable should be shown preferably as a ____.
collectible within one year, deduction from Subscribed Share Capital
Creditors’ Accounts that have Debit Balances as a result of Overpayment or Returns and Allowances are classified as ____
current assets
If the Creditors’ Accounts that have Debit Balances as a result of Overpayment or Returns and Allowance are ____, an offset may be made against the creditors’ accounts with credit balances and only the _____ may be presented.
not material, net accounts payable
Special Deposits on Contract Bids normally are classified as ____ because such deposits are likely to remain outstanding for a ____ period of time. However, the deposits that are ____ should be classified as current assets.
noncurrent assets, considerably long, currently collectible
Accrued income (Dividends Receivable, Accrued Rent Income, Accrued Royalties Income, and Accrued Interest on Bond Investment) are usually classified as ___
current assets
Claims Receivable (Claims against Common Carriers for losses or damages, Claim for Rebates and Tax Refunds, Claims from Insurance Entities) are normally classified as ____
current assets
Customers’ ____ are ____ in Accounts Receivable resulting from overpayments, returns and allowances, and advance payments from customers.
credit balances, credit balances
Customers’ credit balances in Accounts Receivable resulting from overpayments, returns and allowances, and advance payments from customers are classified as ___ and are not ____ against the ____ in other customers’ accounts, except when the same is _____ in which case, only the ____ may be presented
current liabilities, offset, debit balances, not material, net accounts receivable
T/F: Adjustment is necessary to formally recognize the customers’ credit balances.
No adjustment is necessary because these are ultimately canceled for sales and cash settlement. But an adjustment may be made only for worksheet purposes, meaning, not formally journalized and posted to the ledger as: Dr. A/R, Cr. Customers’ credit balances
A financial asset shall be recognized initially at ___ that are directly attributable to the acquisition
fair value plus transaction costs
Fair value of a financial asset is usually the ___, meaning, the fair value of the consideration given.
transaction price
For short-term receivables, the fair value is equal to the ___ or ____
face value, original invoice amount
Cash flows relating to short-term receivables are not ___ because the effects of _____ is usually ___
discounted, discounting, immaterial
For long-term receivables that are interest-bearing, the fair value is equal to the ___
face value
For long-term receivables that are noninterest-bearing, the fair value is equal to the ____ for similar receivables.
present value of all future cash flows discounted using the prevailing market rate of interest
Initially, long term interest-bearing notes receivable shall be measured at ___ and long-term noninterest-bearing notes receivable shall be measured at ____
face value, present value
Accounts Receivable shall be measured initially at ___ or ____
face value, original invoice amount
Subsequently, A/R shall be measured at ___, meaning the amount of ____
net realizable value, cash expected to be collected or the estimated recoverable amount
In the NRV of trade A/R, the following deductions are made:
Allowance for Frieght Charge, Allowance for Sales Return, Allowance for Sales Discount, Allowance for Doubtful Accoutns
FOB Destination means that ownership of the goods purchased is vested in the ___ upon ___. Accordingly, the ___ shall be responsible for the ___ up to the point of destination.
buyer, receipt thereof, seller, freight charge
FOB Shipping Point means that ownership of the goods purchased is vested in the ___ upon ___. Accordingly, the ___ shall be responsible for the ___ from the point of shipment to the point of destination.
seller, shipment thereof, buyer, freight charge
Freight Collect means that freight charge on the goods shipped is ____. The common carrier shall collect the same from the ___. Thus, under this, the freight charge is actually paid by the ____.
not yet paid, buyer, buyer.
Freight Prepaid means that freight charge on the goods shipped is ____ by the ___
already paid, seller
In FOB Destination + Freight Collect, the entries of the seller upon sale on account are: ___; the entries of the seller to record the collection within the discount period are: ___
Dr. A/R at the total sale price, Dr. Freight out at for the freight out cost, Cr. Sales at the total sale price, Cr. Allowance for freight charge at the freight out cost; Dr. Cash at the balancing amount, Dr. Sales Discount at the discount price, Dr. Allowance for Freight Charge at the freight out cost, Cr. A/R at the total sales price
The entries to record the estimate of total A/R at year-end that represents selling price of goods that will probably be returned are:
Dr. Sales Return at the estimate, Cr. Allowance for Sales Return at the estimate
The entries to record the collection made beyond the discount period under Net Method are:
Dr. Cash at face value, Cr. A/R at the discounted price, Cr. Sales Discount Forfeited at the discount
The entries to record the reliable estimate of expected sales discount are:
Dr. Sales Discount at the estimate, Cr. Allowance for Sales Discount at the estimate
The adjustment to record the reliable estimate of expected sales discount may be __ at the beginning of the next period in order that discounts can then be charged normally to Sales Discount account.
reversed
The entries to record the unexpected recovery and collection of the accounts that were previously written off (allowance method) are:
Reversal of the write off: Dr. A/R at the write-off, Cr. ADA at the write-off; Collection: Dr. Cash at the amount collected, Cr. A/R at the amount collected
The ___ recognizes only the ____ method for income tax purposes
BIR, direct writeoff
The direct writeoff method violates the ___ principle because the ___ is often recognized in later ____ than the period in which the ____ was recognized.
matching, Bad Debt Expense, accounting period, Sales Revenue
The entries to record the unexpected recovery and collection of the accounts that were previously written off (direct writeoff) are:
Reversal of the write off: Dr. A/R at the write-off, Cr. Bad Debts Expense at the write-off; Collection: Dr. Cash at the amount collected, Cr. A/R at the amount collected
T/F: Under the direct writeoff method, no entry is necessary in the estimation of doubtful accounts.
True.
Under the direct writeoff method, If the recovery is ____, the recovery may simply be credited to _____
subsequent to the year of writeoff, Other Income
In the absence of any contrary statement, Bed Debts Expense shall be classified as ___
Administrative Expense
If the granting of credit and collection of accounts are under the charge of the sales manager, Bad Debts Expense shall be considered as ____
Distribution Cost
If the granting of credit and collection of accounts are under the charge of an officer other than sales manager, Bad Debts Expense shall be considered as ____
Administrative Expense
