Chapter 5 Flashcards
Chapter 5 focuses on
Cash and Receivables
- Initial recognition and measurement
- subsequent measurement on the balance sheet
- de recognition or removal from the balance sheet
The Journal Entries of Accounts Receivables
The two methods of initial recognition and measurement for accounts receivable given the present or option of cash discounts are
Gross Method and Net Method
A discount given to motivate timely payment is called a
Cash Discount
2/10 Net 30 mean
A two % discount is given if paid within 10 days if not the total is due within 30 days
Record AR at face value and if a customer takes advantage of the discount record the discount as a reduction in revenue on the income statement
Gross Method
Record AR at the discounted value and if a customer fails to take advantage of the discount then record the interests earned
Net Method
A contra asset account to AR that reflects the estimate of uncollectables which is made on the balance sheet date and brings down or adjusts the net accounts receivable
Allowance for Doubtful Accounts
The journal entry for estimating uncollectibles
DR Bad Debt Expense
CR Allowance for DoubtfulAccounts
Journal entry for write off of accounts receivables
DR Allowance for Doubtful Accounts
CR Accounts Receivable
The journal entry for the recovery of write off
DR AR
CR Allowance for Doubtful Accounts
DR Cash
CR Accounts Receivable
The Percent of Sales Method
The Percent of Receivables or Aging Method
