Receivables

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Author:
Lea_
ID:
310016
Filename:
Receivables
Updated:
2015-10-22 04:06:41
Tags:
ACC110
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Description:
Receivables
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  1. Types of Receivables
    Accounts Receivables - amounts owing by customers on account.

    Notes Receivables (Promissory Notes) - claims for which formal instruments of credit are issued evidencing the debt.

    Other Receivables - non-trade receivables (interest receivable, loans, advances, GST paid).
  2. Valuing Accounts Receivable
    Direct write-off method

    Allowance method
  3. Direct Write-off Method
    Uncollectable account is specifically identified and written off.

    Receivables are reported at gross amount.

    • Dr Bad Debts Expense
    • Cr Accounts Receivable
  4. Allowance Method
    Receivables are reported at net realistic value (NRV).

    Receivables are reduced by estimated uncollectable receivables.

    • Estimated uncollectables
    • Dr Bad Debts Expense
    • Cr Allowance for Doubtful Debts

    • Actual uncollectables
    • Dr Allowance for Doubtful Debts
    • Cr Accounts Receivables
  5. Recovery of Uncollectable Amount
    • Dr Accounts Receivable
    • Cr Allowance for Doubtful Debts
    • (reverse write-off)

    • Dr Cash
    • Cr Accounts Receivable
  6. Estimating Allowance for Bad Debts
    % of net sales

    Ageing of Accounts Receivable

    Others
  7. % of Net Sales
    • Credit sales = $100,000
    • Estimated % = 5%
    • Allowance = $5,00010
  8. Notes Receivable
    A formal credit instrument.

    Does not always arise from transactions with customers.

    Is included as an asset in the financial statements.

    May be current or non-current assets.
  9. Recognising Notes Receivable
    • Dr Notes Receivable
    • Cr Accounts Receivable
    • (Record acceptance of note)

    • Dr Cash
    • Cr Notes Receivable
    • Cr Interest Revenue
    • (To record collection including interest)
  10. Exchanging (Discounting) Notes
    • Dr Cash
    • Dr Interest Expense
    • Cr Notes Receivable

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