principles of accounting(會計學原理)chapter09(39p)

1、ACCOUNTING FOR RECEIVABLES Chapter 9 ACCOUNTS RECEIVABLE Amounts due from customers for credit sales. Credit sales require: Maintaining a separate account receivable for each customer. Accounting for bad debts that result from credit sales. C 1 RECOGNIZING ACCOUNTS RECEIVABLE C 1 TechCom as two majo

2、r credit customers (1) CompStore owes the company $2,000 on account, and (2) RDA Electronics owes $1,000 on account at June 30, 2009. On July 1st, TechCom sells $950 of merchandise on account to CompStore, and collects $720 cash from RDA as a payment on account. SALES ON CREDIT DRCR Jul 1 Accounts R

3、eceivable - CompStore 950 Sales 950 To record credit sales to CompStore Cash 720 Accounts Receivable RDA Electronics 720 To record credit sales to RDA Electronics C 1 SALES ON CREDIT C 1 Advantagesofallowingcustomerstouse creditcards: Customers credit is evaluated by the credit card issuer. The risk

4、s of extending credit are transferred to the credit card issuer. Cash collections are quicker. Sales increase by providing purchase options to the customer. CREDIT CARD SALES C 1 Withbankcreditcards,theseller depositsthecreditcardsalesreceipt inthebankjustlikeitdepositsa customerscheck. Thebankincre

5、asesthebalanceinthe companyscheckingaccount. Thecompanyusuallypaysafeeof1% to5%fortheservice. CREDIT CARD SALES C 1 CREDIT CARD SALES C 1 CREDIT CARD SALES C 1 INSTALLMENT ACCOUNTS RECEIVABLE C 1 VALUING ACCOUNTS RECEIVABLE P1 DIRECT WRITE-OFF METHOD P1 On March 11th, J. Kent was able to make full p

6、ayment to TechCom for the amount previously written-off. DIRECT WRITE-OFF METHOD P1 MATCHING VS. MATERIALITY Matching requires expenses to be reported in the same accounting period as the sales they help produce. Materiality states that an amount can be ignored if its effect on the financial stateme

7、nts is unimportant to users business decisions. P2 Attheendofeachperiod,estimatetotalbaddebts expectedtoberealizedfromthatperiodssales. Therearetwoadvantagestotheallowancemethod: Itrecordsestimatedbaddebtsexpenseinthe periodwhentherelatedsalesarerecorded. 1.Itreportsaccountsreceivableonthebalance sh

8、eetattheestimatedamountofcashtobe collected. ALLOWANCE METHOD P2 RECORDING BAD DEBTS EXPENSE At the end of its first year of operations, TechCom estimates that $1,500 of its accounts receivable will prove uncollectible. The total accounts receivable balance at December 31, 2009, is $20,000, and the

9、company had total credit sales of $300,000 during the year. Contra-asset account P2 BALANCE SHEET PRESENTATION At the end of its first year of operations, TechCom estimates that $1,500 of its accounts receivable will prove uncollectible. The total accounts receivable balance at December 31, 2009, is

10、 $20,000, and the company had total credit sales of $300,000 during the year. P2 Two Methods Percent of Sales Method Accounts Receivable Methods lPercent of Accounts Receivable 1.Aging of Accounts Receivable ESTIMATING BAD DEBTS EXPENSE P2 Bad debts expense is computed as follows: PERCENT OF SALES M

11、ETHOD Musicland has credit sales of $400,000 in 2009. It is estimated that 0.6% of credit sales will eventually prove uncollectible. Lets look at recording Bad Debts Expense for 2009. P2 Musiclandsaccountant computesestimated BadDebtsExpenseof $2,400. PERCENT OF SALES METHOD P2 Computetheestimateoft

12、heAllowance forDoubtfulAccounts. BadDebtsExpenseiscomputedas: PERCENT OF RECEIVABLES METHOD Total Estimated Bad Debts Expense - Previous Balance in Allowance Account = Current Bad Debts Expense P2 Musicland has $50,000 in accounts receivable and a $200 credit balance in Allowance for Doubtful Accoun

13、ts on December 31, 2009. Past experience suggests that 5% of receivables are uncollectible. Lets record Musiclands Bad Debts Expense for 2009. PERCENT OF ACCOUNTS RECEIVABLE P2 DesiredbalanceinAllowancefor DoubtfulAccounts. PERCENT OF ACCOUNTS RECEIVABLE P2 Eachreceivableisgroupedby howlongitispasti

14、tsduedate. Estimatedbaddebtsforeach grouparetotaled. AGING OF ACCOUNTS RECEIVABLE METHOD Eachagegroupismultiplied byitsestimatedbaddebts percentage. P2 AGING OF ACCOUNTS RECEIVABLE P2 Musicland has an unadjusted credit balance in the allowance account is $200. We estimated the proper balance to be $

15、2,270. AGING OF ACCOUNTS RECEIVABLE P2 Balance SheetFocus %ofSales Emphasison Matching Sales Bad Debts Exp. Income Statement Focus %ofReceivables Emphasison RealizableValue Accts. Rec. All.for Doubtful Accts. Agingof Receivables Emphasison RealizableValue Accts. Rec. All.for Doubtful Accts. SUMMARY

16、OF METHODS P2 $1,000.00July10,2009 Ninetydays TechCom,LosAngeles,CA Onethousandandno/100- Dollars FirstNationalBankofLosAngeles,CA 42 12% Julia Browne after date I promise to pay to the order of Payable at Value received with interest at per annum No. Due Oct.8,2009 Term Payee Maker NOTES RECEIVABLE

17、 DueDate Principal InterestRate C2 Ifthenoteis expressedin days,basea yearon360 days. Evenfor maturitiesless thanoneyear, therateis annualized. INTEREST COMPUTATION C2 COMPUTING MATURITY AND INTEREST ThenoteisdueandpayableonOctober8,2009. On July 10, 2009, TechCom received a $1,000, 90-day, 12% prom

18、issory note as a result of a sale to Julia Browne. What is the maturity date of the note? C2 Total interest is due on October 8, 2009. COMPUTING MATURITY AND INTEREST P3 RECOGNIZING NOTES RECEIVABLE HereistheentrytorecordthenoteonJuly10,2009. P3 HONORING NOTES RECEIVABLE Hereistheentrytohonorthenote

19、onOctober8,2009. P4 RECORDING A DISHONORED NOTE P4 RECORDING END-OF-PERIOD INTEREST ADJUSTMENTS P4 OnDecember16th,TechComacceptsa$3,000,60- day,12%notefromacustomeringrantingan extensiononapast-dueaccount.WhenTechComs accountingperiodendsonDecember31,$15of interesthasaccruedonthenote. RECORDING END-OF-PERIOD INT