account receivable management ppt and accounts receivable powerpoint presentation
Dr.DouglasPatton,United States,Teacher
Published Date:26-07-2017
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CHAPTER
9
ACCOUNTING FOR
RECEIVABLES
www.ThesisScientist.comRECEIVABLES
• The term receivables refers to amounts due from
individuals and other companies; they are claims
expected to be collected in cash.
• Three major classes of receivables are:
1. Accounts Receivable
2. Notes Receivable
3. Other Receivables
www.ThesisScientist.comACCOUNTS RECEIVABLE
The three primary accounting problems
associated with accounts receivable are:
1. Recognizing accounts receivable.
2. Valuing accounts receivable.
3. Disposing of accounts receivable.
www.ThesisScientist.comRECOGNIZING
ACCOUNTS RECEIVABLE
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
July 1 Accounts Receivable - Adorable Junior
1,000
Sales
1,000
To record sales on account.
When a business sells merchandise to a
customer on credit, Accounts Receivable is
debited and Sales is credited.
www.ThesisScientist.comRECOGNIZING
ACCOUNTS RECEIVABLE
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
July 5 Sales Returns and Allowances
100
Accounts Receivable - Adorable
100
To record merchandise returned.
When a business receives returned merchandise
previously sold to a customer on credit, Sales
Returns and Allowances is debited and
Accounts Receivable is credited.
www.ThesisScientist.comRECOGNIZING
ACCOUNTS RECEIVABLE
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
July 31 Cash (1,000 - 100)
900
Accounts Receivable - Adorable
900
To record collection of account.
When a business collects cash from a customer
for merchandise previously sold on credit, Cash
is debited and Accounts Receivable is credited.
www.ThesisScientist.comRECOGNIZING
ACCOUNTS RECEIVABLE
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
July 31 Accounts Receivable - Adorable
13.50
Interest Revenue
13.50
To record interest on amount due.
When financing charges are added to a balance
owing, Accounts Receivable is debited and
Interest Revenue is credited.
www.ThesisScientist.comVALUING
ACCOUNTS RECEIVABLE
• To ensure that receivables are not
overstated on the balance sheet, they are
stated at their net realizable value.
• Net realizable value is the net amount
expected to be received in cash and
excludes amounts that the company
estimates it will not be able to collect.
www.ThesisScientist.comVALUING
ACCOUNTS RECEIVABLE
• Two methods of accounting for
uncollectible accounts are:
1. Allowance method
2. Direct write-off method
www.ThesisScientist.comDIRECT WRITE-OFF METHOD
• Under the direct write-off method, no entries
are made for bad debts until an account is
determined to be uncollectible at which time
the loss is charged to Bad Debts Expense.
• No attempt is made to match bad debts to
sales revenues or to show the net realizable
value of accounts receivable on the balance
sheet.
www.ThesisScientist.comDIRECT WRITE-OFF METHOD
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
Jan. 12 Bad Debts Expense
200
Accounts Receivable — E. Schaefer 200
For write-off of E. Schaefer account.
Periera Company writes off E. Schaefer’s 200
balance as uncollectible on January 12. When
this method is used, Bad Debts Expense will
show only actual losses from uncollectibles.
www.ThesisScientist.comTHE ALLOWANCE METHOD
• The allowance method is required when bad
debts are deemed to be material in amount.
• Uncollectible accounts are estimated and the
expense for the uncollectible accounts is
matched against sales in the same
accounting period in which the sales
occurred.
www.ThesisScientist.comTHE ALLOWANCE METHOD
GENERAL JOURNAL
Date Account Title and Explanation Debit Credit
Dec. 31 Bad Debts Expense 24,000
Allowance for Doubtful Accounts 24,000
To record estimate of uncollectible accounts.
Estimated uncollectible amounts are debited to
Bad Debts Expense and credited to Allowance
for Doubtful Accounts (a contra asset account) at
the end of each period.
www.ThesisScientist.comADORABLE JUNIOR GARMET
Balance Sheet (partial)
Current assets
Cash 14,800
Accounts receivable 200,000
Less: Allowance for doubtful accounts 24,000 188,000
Net Realizable Value
www.ThesisScientist.comTHE ALLOWANCE METHOD
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
500
Mar. 1 Allowance for Doubtful Accounts
Accounts Receivable — Nadeau 500
Write-off of Nadeau account.
Actual uncollectible accounts are debited to
Allowance for Doubtful Accounts and credited to
Accounts Receivable at the time the specific
account is written off.
www.ThesisScientist.comTHE ALLOWANCE METHOD
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
500
July 1 Accounts Receivable — Nadeau
500
Allowance for Doubtful Accounts
To reverse write-off of Nadeau
account.
When there is recovery of an account that has
been written off:
1. reverse the entry made to write off the account
and ...
www.ThesisScientist.comTHE ALLOWANCE METHOD
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
500
July 1 Cash
500
Accounts Receivable —Nadeau
To record collection from Nadeau.
2. Record the collection in the usual manner.
www.ThesisScientist.comBASES USED FOR THE
ALLOWANCE METHOD
• Companies use either of two methods in
the estimation of uncollectible accounts:
1. Percentage of sales
2. Percentage of receivables
• Both bases are GAAP; the choice is a
management decision.
www.ThesisScientist.comILLUSTRATION 9-4
COMPARISON OF BASES OF
ESTIMATING UNCOLLECTIBLES
Percentage of Sales
Percentage of Receivables
Matching
Net Realizable Value
Allowance
Sales Bad Debts
Accounts for
Expense
Receivable Doubtful
Accounts
Emphasis on Income
Emphasis on
Statement
Balance Sheet
Relationships
Relationships
www.ThesisScientist.comPERCENTAGE OF SALES BASIS
• In the percentage of sales basis, management
establishes a percentage relationship between
the amount of credit sales and expected losses
from uncollectible accounts.
• Expected bad debt losses are
determined by applying the
percentage to the sales base of
the current period.
• This basis better matches expenses
with revenues.
www.ThesisScientist.com
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