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1、ACCOUNTING FOR RECEIVABLESChapter 9Accounts ReceivableAmounts 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 1Recognizing Accounts ReceivableSales on CreditCredit sales are

2、recorded by increasing (debiting) Accounts Receivable. A company must also maintain a separate account for each customer that tracks how much that customer purchases, has already paid, and still owes.C 1 as two major credit customers (1) CompStore owes the company $2,000 on account, and (2) RDA Elec

3、tronics owes $1,000 on account at June 30, 2009. On July 1st, sells $950 of merchandise on account to CompStore, and collects $720 cash from RDA as a payment on account.Sales on Credit DR CR Jul 1 Accounts Receivable - CompStore 950 Sales 950 To record credit sales to CompStore Cash 720 Accounts Rec

4、eivable RDA Electronics 720 To record credit sales to RDA Electronics C 1Sales on CreditC 1Advantages of allowing customers to use credit cards:Customers credit is evaluated by the credit card issuer.The risks of extending credit are transferred to the credit card issuer.Cash collections are quicker

5、.Sales increase by providing purchase options to the customer.Credit Card SalesC 1 With bank credit cards, the seller deposits the credit card sales receipt in the bank just like it deposits a customers check. The bank increases the balance in the companys checking account. The company usually pays

6、a fee of 1% to 5% for the service.Credit Card SalesC 1 On July 15th, has $100 of credit card sales with a 4% fee, and its $96 cash is received immediately on deposit. Credit Card SalesC 1Credit Card Sales If instead must remit electronically the credit card sales receipts to the credit card company

7、and wait for the $96 cash payment, we will make the first entry on July 15th, and the second entry on July 28th, when the cash is received. C 1INSTALLMENT ACCOUNTS RECEIVABLEAmounts owed by customers from credit sales for which payment is required in periodic amounts over an extended time period. Th

8、e customer is usually charged interest.C 1 Some customers may not pay their account. Uncollectible amounts are referred to as bad debts. There are two methods of accounting for bad debts:Direct Write-Off MethodAllowance MethodValuing Accounts ReceivableP1 On January 23rd, J. Kent, a customer of cann

9、ot pay the $520 owed to . We must recognize the loss. Direct Write-Off MethodP1 On March 11th, J. Kent was able to make full payment to for the amount previously written-off.Direct Write-Off MethodP1Matching vs. MaterialityMatching requires expenses to be reported in the same accounting period as th

10、e sales they help produce.Materiality states that an amount can be ignored if its effect on the financial statements is unimportant to users business decisions.P2At the end of each period, estimate total bad debts expected to be realized from that periods sales.There are two advantages to the allowa

11、nce method:It records estimated bad debts expense in the period when the related sales are recorded.It reports accounts receivable on the balance sheet at the estimated amount of cash to be collected.Allowance MethodP2Recording Bad Debts ExpenseAt the end of its first year of operations, estimates t

12、hat $1,500 of its accounts receivable will prove uncollectible. The total accounts receivable balance at December 31, 2009, is $20,000, and the company had total credit sales of $300,000 during the year.Contra-asset accountP2Balance Sheet PresentationAt the end of its first year of operations, estim

13、ates that $1,500 of its accounts receivable will prove uncollectible. The total accounts receivable balance at December 31, 2009, is $20,000, and the company had total credit sales of $300,000 during the year.P2Two Methods Percent of Sales Method Accounts Receivable MethodsPercent of Accounts Receiv

14、ableAging of Accounts ReceivableEstimating Bad Debts ExpenseP2Bad debts expense is computed as follows:Percent of Sales MethodMusicland 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 200

15、9.P2Musiclands accountant computes estimated Bad Debts Expense of $2,400.Percent of Sales MethodP2Compute the estimate of the Allowance for Doubtful Accounts. Bad Debts Expense is computed as:Percent of Receivables Method Total Estimated Bad Debts Expense Previous Balance in Allowance Account = Curr

16、ent Bad Debts Expense P2Musicland has $50,000 in accounts receivable and a $200 credit balance in Allowance for Doubtful Accounts on December 31, 2009. Past experience suggests that 5% of receivables are uncollectible. Lets record Musiclands Bad Debts Expense for 2009.Percent of Accounts ReceivableP

17、2Desired balance in Allowance for Doubtful Accounts.Percent of Accounts ReceivableP2 Each receivable is grouped by how long it is past its due date. Estimated bad debts for each group are totaled.Aging of Accounts Receivable Method Each age group is multiplied by its estimated bad debts percentage.P

18、2 Aging of Accounts Receivable P2Musicland has an unadjusted credit balance in the allowance account is $200.We estimated the proper balance to be $2,270.Aging of Accounts ReceivableP2Balance Sheet Focus% of SalesEmphasis on MatchingSalesBad Debts Exp. e Statement Focus% of ReceivablesEmphasis on Re

19、alizable ValueAccts. Rec.All. for Doubtful Accts.Aging of ReceivablesEmphasis on Realizable ValueAccts. Rec.All. for Doubtful Accts.Summary of MethodsP2$1,000.00July 10, 2009Ninety days , Los Angeles, CAOne thousand and no/100 - DollarsFirst National Bank of Los Angeles, CA4212%Julia Browneafter dat

20、e I promise to pay tothe order of Payable atValue received with interest at per annumNo. Due Oct. 8, 2009TermPayeeMakerNotes ReceivableDue DatePrincipalInterest RateC2If the note is expressed in days, base a year on 360 days.Even for maturities less than one year, the rate is annualized.Interest Com

21、putationC2Computing Maturity and InterestThe note is due and payable on October 8, 2009.On July 10, 2009, received a $1,000, 90-day, 12% promissory note as a result of a sale to Julia Browne. What is the maturity date of the note?C2Total interest is due on October 8, 2009.Computing Maturity and Inte

22、restP3Recognizing Notes ReceivableHere is the entry to record the note on July 10, 2009.P3HONORING NOTES RECEIVABLEHere is the entry to honor the note on October 8, 2009.P4Recording a Dishonored Note holds an $800, 12%, 60-day note of Greg Hart. At maturity, October 14th, Hart dishonors the note.$80

23、0 12% 60/360 = $16 interestP4Recording End-of-Period Interest AdjustmentsP4On December 16th, accepts a $3,000, 60-day, 12% note from a customer in granting an extension on a past-due account. When s accounting period ends on December 31, $15 of interest has accrued on the note. $3,000 12% 15/360 = $15 accrued interest Recording End-of-Period Interest Adjustmen