Chapter 6: Receivables Flashcards
What is the journal entry to record credit loss expense under the allowance method?
(DB) Credit Loss Expense (Net income impacted)
(CR) Allowance for credit losses account (contra AR)
What is the journal entry to write off uncollectible accounts?
(DB) Allowance for credit losses account
(CR) Accounts Receivable
Do write-offs have an impact on net income and total assets under the allowance method?
No they don’t. The write-off debits the allowance for credit losses and credits accounts receivable. Because of this they do not have an impact on expenses or net income. Also, due to the offset of the JE, it does not have an impact on total assets.
What is a chain trade discount?
A 2nd discount after the first discount is given.
What is the difference between the gross method and the net method for cash discounts?
The gross method will record the full sale at the sale date and then record the sales discount when paid vs recording the discount included at the sale date for the net method.
What is Net AR?
Net AR (normal debit balance) includes allowance for credit losses (normal credit balance). To get gross AR, add back the allowance for credit losses.
What is the outright sale of accounts receivable at a discount referred to?
Factoring
