《银行会计学》（英文版）Chapter F7 Receivables

Chapter F7 Power notes Receivables Learning Objectives 1. Classification of receivables 2. Internal Control of receivables C7 3. Uncollectible Receivables 4 Uncollectibles- Alowance Method 5. Uncollectibles- Direct Write-Off Method 6. Characteristics of notes receivable 7. Accounting for Notes Receivable 8. Balance Sheet Presentation 9. Financial Analysis and Interpretation c7-1

C7 - 1 Learning Objectives Power Notes 1. Classification of Receivables 2. Internal Control of Receivables 3. Uncollectible Receivables 4. Uncollectibles – Allowance Method 5. Uncollectibles – Direct Write-Off Method 6. Characteristics of Notes Receivable 7. Accounting for Notes Receivable 8. Balance Sheet Presentation 9. Financial Analysis and Interpretation Chapter F7 C7 Receivables

Chapter F7 Power notes Receivables Slide #f Power Note Topics 2. Receivables - Classification and control 4. Uncollectibles- Direct Write-Off Method 6. Uncollectibles -Allowance Method 15. Accounting for Notes Receivable 20.Balance Sheet Presentation 21. Accounts Receivable Turnover 22. Number of Days'Sales in Receival k Note: To select a topic, type the slide# and press Enter c7-2

C7 - 2 • Receivables – Classification and Control • Uncollectibles – Direct Write-Off Method • Uncollectibles –Allowance Method • Accounting for Notes Receivable • Balance Sheet Presentation • Accounts Receivable Turnover • Number of Days’ Sales in Receivables Slide # Power Note Topics 2 4 6 15 20 21 22 Note: To select a topic, type the slide # and press Enter. Chapter F7 Power Notes 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 -interest receivable, taxes receivable, and receivables from officers or employees. c7-3

C7 - 3 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 – interest receivable, taxes receivable, and receivables from officers or employees

Accounting for Uncollectible Accounts Receivable The Direct Write-Off Method This method is not consistent with the matching principle Accounts that prove to be uncollectible are written off in the year they become worthless. Uncollectible Accounts Expense is debited and Accounts Receivable is credited for each such transaction c7-4

C7 - 4 Accounting for Uncollectible Accounts Receivable • This method is not consistent with the matching principle. • Accounts that prove to be uncollectible are written off in the year they become worthless. • Uncollectible Accounts Expense is debited and Accounts Receivable is credited for each such transaction. The Direct Write-Off Method

Journal Entries- Direct Write-Off Method Date Description Debit Credit May. 10 Uncollectible Accts. Expense 420 Accts. receivable,L. Ross 420 Write off uncollectible account of $420 Nov, 21 Accts Receivable -D. L. Ross 420 Uncollectible Accts. Expense 420 Cash 420 Accts. Receivable-d.L. ross 420 Reinstate and collect prior account written off c7-5

C7 - 5 Journal Entries – Direct Write-Off Method Date Description Debit Credit Uncollectible Accts. Expense 420 Accts. Receivable - D. L. Ross 420 Accts. Receivable - D. L. Ross 420 Uncollectible Accts. Expense 420 Cash 420 Accts. Receivable - D. L. Ross 420 Write off uncollectible account of $420 Reinstate and collect prior account written off. May. 10 Nov. 21

Accounting for Uncollectible Accounts Receivable The Allowance Method This method is consistent with the matching principle Management makes an estimate each year of the portion of accounts receivable that may not be collectible Uncollectible Accounts Expense is debited and Allowance for Doubtful Accounts is credited Actual accounts that prove to be uncollectible are debited to Allowance for Doubtful Accounts and credited to Accounts receivable c7-6

C7 - 6 Accounting for Uncollectible Accounts Receivable • This method is consistent with the matching principle. • Management makes an estimate each year of the portion of accounts receivable that may not be collectible. • Uncollectible Accounts Expense is debited and Allowance for Doubtful Accounts is credited. • Actual accounts that prove to be uncollectible are debited to Allowance for Doubtful Accounts and credited to Accounts Receivable. The Allowance Method

Journal entries- Allowance Method Date Description Debit Credit Dec 31 Uncollectible Accts. Expense 4,000 Allowance for doubtful Acct 4.000 Estimated a total of $4,000 will be uncollectible. Jan, 21 Allowance for doubtful Accts 610 Accts. receivable-J Parker 610 Write off uncollectible account of $610. Jun 10 Accts. Receivable-J Parker 610 Allowance for Doubtful Accts 610 Cash 610 Accts. Receivable-J Parker 610 Reinstate and collect prior account written off. c7-7

C7 - 7 Journal Entries – Allowance Method Date Description Debit Credit Uncollectible Accts. Expense 4,000 Allowance for Doubtful Acct. 4,000 Allowance for Doubtful Accts. 610 Accts. Receivable - J. Parker 610 Accts. Receivable - J. Parker 610 Allowance for Doubtful Accts. 610 Cash 610 Accts. Receivable - J. Parker 610 Estimated a total of $4,000 will be uncollectible. Write off uncollectible account of $610. Reinstate and collect prior account written off. Dec. 31 Jan. 21 Jun. 10

Estimating Uncollectible Accounts Expense The allowance method uses two ways to estimate the amount debited to Uncollectible Accounts Expense 1. Estimate based on a percentage of sales If credit sales for the period are $300,000 and it is estimated that 1% will be uncollectible, the Uncollectible Accounts Expense is $3, 000. 2. Estimate based on analysis of receivables If it is estimated that $3, 390 of the receivables will be uncollectible and the allowance for Uncollectible Accounts is $510, the Uncollectible Accounts Expense is $2, 880( $3, 390-$510). c7-8

C7 - 8 Estimating Uncollectible Accounts Expense 1. Estimate based on a percentage of sales. If credit sales for the period are $300,000 and it is estimated that 1% will be uncollectible, the Uncollectible Accounts Expense is $3,000. 2. Estimate based on analysis of receivables. If it is estimated that $3,390 of the receivables will be uncollectible and the Allowance for Uncollectible Accounts is $510, the Uncollectible Accounts Expense is $2,880 ($3,390 – $510). The allowance method uses two ways to estimate the amount debited to Uncollectible Accounts Expense

Accounts Receivable Aging and Uncollectibles Days Past Due Not over Customer Balance‖ Past Due 13031-60619091180181-365 365 Ash by Co $150 $150 B. T Barr 610 $350$260 Brock co 470 $470 J. Zimmer Co 160 160 86,300$75,000$4,000$3,100$1,900$1,200$800$300 Total accounts receivable shown by age. c7-9

C7 - 9 Accounts Receivable Aging and Uncollectibles Days Past Due over Customer Balance Past Due 1-30 31-60 61-90 91-180 181-365 365 Ashby & Co. $ 150 $ 150 B. T. Barr 610 $ 350 $260 Brock Co. 470 $ 470 J. Zimmer Co. 160 160 Total $86,300 $75,000 $4,000 $3,100 $1,900 $1,200 $800 $300 Total accounts receivable shown by age. Not

Accounts Receivable Aging and Uncollectibles Days Past Due Not over Customer Balance‖ Past Due 13031-60619091180181-365 365 Ash by Co $150 $150 B. T Barr 610 $350$260 Brock co 470 $470 J. Zimmer Co 160 160 Total $86,300$75000$4000$3100$100$1200$800$300 Uncollectibles PERCENT 2% 5%10%20%30%50%80% Uncollectible percentages based on experience and industry averages. c7-10

C7 - 10 Accounts Receivable Aging and Uncollectibles 2% 5% 10% 20% 30% 50% 80% Uncollectibles PERCENT Days Past Due over Customer Balance Past Due 1-30 31-60 61-90 91-180 181-365 365 Ashby & Co. $ 150 $ 150 B. T. Barr 610 $ 350 $260 Brock Co. 470 $ 470 J. Zimmer Co. 160 160 Total $86,300 $75,000 $4,000 $3,100 $1,900 $1,200 $800 $300 Uncollectible percentages based on experience and industry averages. Not