chapter 12 and 13

Question 1

bills receivable

Answer 1

• receivable evidenced by a formal written promise
• more formal than acc. rec.
• used for financing purpose

Question 2

bad and doubtful debts

Answer 2

• uncollectable acc. rec
• bad debts expenses are estimated at the end of acc period
• shows risk of doing business on credit
• minimised thrugh credit checks
• unpaid amounts = business expense

two methods; allowance method and direct write off method

Question 3

allowance method

Answer 3

• written off against allowance

- associated gst also must be removed

Question 4

direct write off method

Answer 4

• recognition of bad debts expense at the time an acc. rec. is deemed to be uncollectable

Question 5

valuation of acc. rec.

Answer 5

• not all amounts owing from rec. are collected
• rec. not collected = expense
• bad debts expense not known until the next acc period
• anticipating future bad debts has consequences for reporting bad debts expense

Question 6

management policies

Answer 6

• decide who to give credit to, ther terms, and how to communicate these terms.

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