Chapter 11 - Receivables Flashcards
If a cash sale has been made and customer pay’s immediately what is the double entry?
Dr Cash/bank
Cr sales revenue
If a customer sale is on credit and paid after 30-60 days what’s the two step double entry?
1) Dr receivables
Cr sales revenue
2) Dr cash/bank
Cr receivables
What is an aged receivables analysis?
The credit control function of an entity uses the analysis to keep track of outstanding debts and follow up any that are overdue
Timely collection of debts improves what?
Cash flow and reduces the risk of receivables becoming irrecoverable
What is a credit limit?
The max amount of credit that the entity is willing to provide to the customer
What do credit limits reduce?
Reduce risk of irrecoverable debts to the entity by limiting the amount sold on credit.
Help build up the trust of a new customer
What is the double entry for a bad debt?
Dr irrecoverable debts expense account
Cr trade receivables ledger control account
What is the step double entry to recover irrecoverable debt?
1) Dr bank account
Cr irrecoverable debts
What is the double entry for an allowance for receivables?
Dr Irrecoverable debts expense
Cr Allowance for receivables
What is the double entry for the increase of an allowance for receivables?
Dr irrecoverable debts
Cr allowance for receivables
What is the double entry to decrease an allowance for receivables?
Dr allowance for receivables
Cr irrecoverable debts
What must you remember to do before determining the allowance for receivables?
Write off all irrecoverable debts
All irrecoverable debts discovered during the year and the end of the year must be charged to the SPL?
True
The movement of the allowances for receivables during the year must be adjusted in the SPL
True
Irrecoverable debts recovered will
Increase the cash and profit for the period
True
The closing allowances for receivables will be deducted from the closing receivables at the end of the year
True
The net irrecoverable debts expense at the end of the year will include adjustments for irrecoverable debts, irrecoverable debts recovered and the movement in the allowances for receivables
True
A decrease in allowances for receivables will do what to the expense and profit?
Expense: reduce
Profit: increase
A increase in allowances for receivables will do what to the expense and profit?
Expense: increase
Profit: reduces
Irrecoverable debts do what to expenses and profit?
Expense: increase
Profit: reduce
What is the trade receivables control account?
This is the total owed by our customers from credit sales and is maintained in a single account
What is the trade receivables ledger?
This is a separate ledger that holds any account for each of our customers to allow, on a day to day basis, for the business to be conducted. Shoes sales to particular customer
Does contra on payables get cr or dr in legder?
Credit
Do cash sales get recorded in t account for receivables?
No
Do discounts received get recorded in t account for receivables?
No
