accounting exam 2

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accounting exam 2
2012-11-05 18:44:06
accounting exam

chapter 8
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  1. receivables
    • selling goods or services to another party on credit, right to revieve cash in future from transaaction
    •        Accounts receiabale
    •        Notes receivable
  2. Account receivable

    control acount

    customer ledger
    ammounts to be collected from customers for sales on credit

    account that summarizes related subsidiary accounts

    subsidiary ledger showing each customers balance
  3. notes receivable
    • longer in term debtor promises to pay by maturaity date
    •      Maturity date- date the debt must be completly paid off

    current asset if within one year long term asset if beyond a year
  4. accounting for uncollectible accounts
    direct write off method: records uncollectible accounts expense when specific account is written off.
  5. estimating uncollectibles
    percent of sales: statement approach, estimates uncollectibles accounts as a percent of sales, calculates bad debt expense, better reflection of matching principle. 

    aging-of-accounts: balance sheet approch, determine target allowance based on age of actual receivables. calculates ending balance in the allowance account. 
  6. writing off uncollectible accounts
    when a specific customer account is identified as uncollectible it is written off to the allowance account.

    • allowance for uncollectible accounts
    •              Accounts receivable---andrews
    •              Accounts receivable---Jones
    • wrote off uncollectable debt.
  7. Recovery of account
    sometimes a customer will pay the amount owed after the customers account is written off

    • two entries needed:
    • 1. reverse the uncollectable account
    • 2. record the payment.
  8. credit and debit card sales are 
    • credit and deit card sales are an alternativve form for receiving payment
    • two types of credit cards
    • - issued by a finacial instituion: visa and mastercard
    • - issued by a credit card company: american express, discovery

    debit cards: same as cash amount subtraced from bank account
  9. bank cards
    retailers receive cash at time of sale, retailers accepting credit cards pays a fee.

    • Two types of fees
    • 1. NET: total sale less the processing fee assesed equals the net amount of cash deposited
    • 2. gross: total sale is deposited andthe fee is deducted at the end of the month
  10. identifying maturity date
    maturity date can be 

    • specific: 
    • stated in terms of number of months
    • stated in terms of number of days
  11. computing interest
    by the year: principal x interest x 12/12 = amount of interest

    by the month: principal x interest x 9/12= amount of interest

    by the day: principal x interest rate x 60/360 = amount of 
  12. accruing interest revenue
    • Interest reveivable (1,000 x .06 x 3/12)
    •         Interest revenue
    • accrued interest revenue. 
  13. accruing interest on maturity date
    • Cash (1000 x .06)
    •      Notes reveivable
    •      Interest receivable
    •      interest revenue
    • Collected note receivable plus interest. 
  14. Days sales in receivables
    collection period, its the number of days it takes to collect the average balance of receivables

    the shorter the collection period the mroe quickly cash is available

    • two steps
    • 1. find one days sales
    • 2. find days slaes in receivables.