Beruflich Dokumente
Kultur Dokumente
Receivables
Financial and Managerial Accounting
8th Edition
Warren Reeve Fess
© Copyright 2004 South-Western, a division
PowerPoint Presentation by Douglas Cloud of Thomson Learning. All rights reserved.
Professor Emeritus of Accounting
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Objectives
1. List the common classifications of
receivables.After studying this
2. Summarize and provide
chapter, examples of
you should
internal controlbeprocedures
able to: that apply to
receivables.
3. Describe the nature of and the
accounting for uncollectible receivables.
4. Journalize the entries for the allowance
method of accounting for uncollectibles,
and estimate uncollectible receivables
based on sales and on an analysis of
receivables.
Objectives
5. Journalize the entries for the direct write-off
of uncollectible receivables.
6. Describe the nature and characteristics of
promissory notes.
7. Journalize the entries for notes receivable
transactions.
8. Prepare the Current Assets presentation of
receivables on the balance sheet.
9. Compute and interpret the accounts
receivable turnover and the number of days’
sales in receivables.
Classification of Receivables
Accounts Receivable—used for selling
merchandise or services on credit, and
normally expected to be collected in a
relatively short period.
Notes Receivable—used to grant credit on the
basis of a formal instrument of credit, called a
promissory note.
Other Receivables—include interest
receivable, taxes receivable, and receivables
from officers and employees.
Separating the Receivable Functions
Credit
Credit Info.
Approval
Collections
Goods
or Acctg.
services Invoice Info
Sales Acctg.
Info.
Accounting
Uncollectible Receivables
The
adjusting
entry fills
the bucket.
Allowance
for
Doubtful
Accounts
The Allowance Method
Writing off
accounts
empties the
bucket.
The Allowance Method
An
Onentry
June is
10,made to reinstate
the written-off
John Parker’s
account account.
is collected.
The Allowance Method
Adjusting Entry
Dec. 31 Uncollectible Accounts Expense 3 000 00
Allowance for Doubtful Accounts 3 000 00
Adjusting Entry
Dec. 31 Uncollectible Accounts Expense 2 880 00
Allowance for Doubtful Accounts 2 880 00
Uncollectibles
PERCENT 2% 5% 10% 20% 30% 50% 80%
Uncollectibles
PERCENT 2% 5% 10% 20% 30% 50% 80%
B Year-end adjustment:
Uncollectible Accts. Expense
B 2,880 $3,390 – $510 = $2,880
1st Entry
2nd Entry
A second entry is needed to record
receipt of the cash.
Notes Receivable
2,500.00
$_____________ Payee
Fresno, California______________20___
March 16 06
Ninety days
________________ _AFTER DATE _______
We PROMISE TO PAY TO
Judson Company
THE ORDER OF ____________________________________________
Two thousand five hundred 00/100---------------------------
_________________________________________________DOLLARS
City National Bank
PAYABLE AT ______________________________________________
Maker
VALUE RECEIVED WITH INTEREST AT ____10%
14
NO. _______ June 14, 2006
DUE___________________
H. B. Lane
TREASURER, WILLIARD COMPANY
Notes Receivable
A promissory note is a written
document containing a promise to pay:
a specific amount of money (principal)
to a specific person or company (payee)
at a specific place
on a specific date or upon demand
plus interest at a specific percentage of
the principal (face) amount per year
Notes Receivable
Let’s determine
The date a note isthe due
to be paid is
date forthea due
called 90-day
date.note
It is also
referred
datedtoMarch
as the maturity
16. date.
Notes Receivable
Total days in note 90 days
Number of days in March 31
Issue date of note March 16
Remaining days in March –15 days
75 days
Number of days in April –30 days
45 days
Number of days in May –31 days
Residual days in June 14 days
Answer: June 14
Notes Receivable
Interest Calculation
Principal x Rate x Time = Interest
$6,000 x 12% x 30/360 = $60.00
Accounts receivable,
$1,220,000end of year
=12.4 days
Average daily sales
($36,000,000 on account
÷ 365 days)
The End