International accounting standards 7

Question 1

receivables (znaczenie)

Answer 1

należności

Question 2

Receivables:

Answer 2

• The term receivables refers to amounts due from individuals and companies
• Receivables are claims that are expected to be collected in cash
• Management of receivables is a very important activity for any company that sells goods or services on credit
• Receivables are important because they represent one of a company’s most liquid assets

Question 3

Types of receivables:

Answer 3

• accounts receivable - Amounts customers owe on account that result from the sale of goods and services
• notes receivable - Written promise (formal instrument) for amount to be received. Normally requires the collection of interest.
• other receivable - Nontrade receivables suchas interest, loans to officers, advances to employees, and income taxes refundable

Question 4

Accounts receivable: recognition

Answer 4

• Service organization records a receivable when it performs service on account
• Merchandiser records accounts receivable at point of sale of merchandise on account
• Seller may offer a discount to encourage early payment
• Buyer might return goods found to be unacceptable
• Sales returns reduce receivables

Question 5

allowance (znaczenie)

Answer 5

odpis aktualizujący

Question 6

Characteristic of accounts receivable:

Answer 6

• Measured at net realizable value (with exeptions) (Wyceniane według wartości netto możliwej do uzyskania (z wyjątkami))
• Sales on account raise possibility of accounts not being collected
• Seller records losses that result from extending credit as Bad Debt Expense

Question 7

Uncollectible Accounts (znaczenie)

Answer 7

rachunki nieściągalne

Question 8

Uncollectible accounts:

Answer 8

• Direct Write-Off Method (metoda bezpośredniego odpisu)
• No matching of expenses with revenues
• Receivable not stated at net realizable value
• Not acceptable for financial reporting purposes (with one exeption)
• Allowance Method
• Better matching of expenses with revenues
• Receivable stated at cash (net) realizable value
• Required for financial reporting purposes

Question 9

conservatism (znaczenie)

Answer 9

ostrożność

Question 10

Allowance Method for Uncollectible Accounts:

Answer 10

• Companies estimate uncollectible accounts receivable.
• Debit Bad Debt Expense and credit Allowance for Doubtful Accounts (a contra-asset account).
• Companies debit Allowance for Doubtful Accounts and credit Accounts Receivable at the time the specific account is written off as uncollectible.

Question 11

estimate (znaczenie)

Answer 11

szacować

Question 12

How are losses estimated?

Answer 12

• percentage-of -sales
• percentage-of- receuvables

Question 13

Percentage-of-Sales:

Answer 13

• An assumed rate (przyjęta stawka) is applied to the amount of the credit sales made during the period

Question 14

Percentage-of-Receivables:

Answer 14

• Management establishes a percentage relationship between amount of receivables and expected losses from uncollectible accounts
• Amount of bad debt expense that should be recorded is difference between required balance and existing balance in allowance account
• Aging schedule is usually prepared, and different rates are applied to different groups of receivables

Question 15

Two major reasons to sell receivables:

Answer 15

• Receivables may be the only
  reasonable source of cash.
• Billing and collection are often time-consuming and costly.

Question 16

Sale of Receivables to a Factor:

Answer 16

• Finance company or bank
• Buys receivables from businesses and then collects payments directly from customers
• Typically charges a commission to company that is selling receivables
• Fee ranges from 1% to 3% of receivables purchased

Question 17

Debit Card Sales:

Answer 17

• Recorded same as cash sales
• (Lower) fee is paid to card issuer

Question 18

Credit Card Sales

Answer 18

• Bank card sales recorded same as cash sales
• Private card sales recorded as receivables
• (Higher) fee is paid to card issuer

Question 19

Promissory notes may be used

Answer 19

-when individuals and companies lend or borrow money,
- when amount of transaction and credit period exceed normal limits, or
- in settlement of accounts receivable

Question 20

promissory notes (znaczenie)

Answer 20

weksle

Question 21

What is promissory note?

Answer 21

Companies may grant credit in exchange for a promissory note. A promissory note is a written promise to pay a specified amount of money on demand or at a definite time

Question 22

To the payee, the promissory note is

Answer 22

a note receivable

Question 23

To the maker, the promissory note is

Answer 23

a note payable

Question 24

Maturity date of a promissory note may be stated in one of three ways:

Answer 24

• On demand.
• On a stated date.
• At the end of a stated period

Question 25

Note terms are expressed in:

Answer 25

* Months * Days

Question 26

Interest =

Answer 26

Face Value of Note × Annual Interest Rate × Time in Terms of One Year

Question 27

Valuation (znaczenie)

Answer 27

wycena

Question 28

Valuation of notes receivable:

Answer 28

- Short-term notes receivable are reported at their cash (net) realizable value - Estimation of cash realizable value and recording bad debt expense and related allowance are similar to accounts receivable

Question 29

Statement of Financial Position

Answer 29

* Identify on statement or in the notes each major type of receivable * Report short-term receivables as current assets * Report net amount

Question 30

Income Statement:

Answer 30

* Report bad debt expense and service charge expense in operating expenses section * Report interest revenue under “Other income and expense” in non-operating section

Question 31

Accounts Receivable Turnover:

Answer 31

Accounts Receivable Turnover measures the number of times on average the receivables are collected during the period. Accounts Receivable Turnover = Net Credit Sales/ Average net accounts reveivable

Question 32

Average Collection Period in Days

Answer 32

Average Collection Period in Days measures the average number of days that a business has to wait to collect receivables Average Collection Period in Days = Days in Year (365)/ Accounts Receivable Turnover