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ACCOUNTING FOR
RECEIVABLES
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Winston Kwok, Ph.D., CPA
Copyright2011byTheMcGrawHillCompanies,Inc.Allrightsreserved.
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ACCOUNTS RECEIVABLE
A receivable is an amount due from another party.
This graph shows recent
dollar amounts of
receivables and their percent
of total assets for four wellknown companies.
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SALES ON CREDIT
On July 1, TechCom had a credit sale of $950 to
CompStore and a collection of $720 from RDA
Electronics from a prior credit sale.
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SALES ON CREDIT
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INSTALLMENT ACCOUNTS
RECEIVABLE
Amounts owed by customers from credit
sales for which payment is required in
periodic amounts over an extended time
period. The customer is usually charged
interest.
Ford Motor Company reports
more than $75 billion in
installment receivables.
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ALLOWANCE METHOD
At the end of each period, estimate total bad
debts expected to be realized from that periods
sales.
1.
2.
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Accounts
Accounts Receivable
Receivable Methods
Methods
Percent
Percent of
of Accounts
Accounts Receivable
Receivable
Aging
Aging of
of Accounts
Accounts Receivable
Receivable
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Each
Eachage
agegroup
groupis
ismultiplied
multiplied by
byits
its
estimated
estimatedbad
baddebts
debtspercentage.
percentage.
Estimated
Estimatedbad
baddebts
debtsfor
foreach
eachgroup
group
are
aretotaled.
totaled.
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SUMMARY OF METHODS
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NOTES RECEIVABLE
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INTEREST COMPUTATION
Even
Even for
for
maturities
maturities less
less
than
than one
one year,
year,
the
the rate
rate is
is
annualized.
annualized.
IfIf the
the note
note is
is
expressed
expressed in
in
days,
days, base
base aa
year
year on
on 360
360
days.
days.
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RECORDING END-OF-PERIOD
INTEREST ADJUSTMENTS
On December 16, TechCom accepts a $3,000, 60-day,
12% note from a customer in granting an extension
on a past-due account. When TechComs accounting
period ends on December 31, $15 of interest has
accrued on the note.
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RECORDING END-OF-PERIOD
INTEREST ADJUSTMENTS
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DISPOSAL OF RECEIVABLES
Companies can convert receivables to
cash before they are due.
Selling
Receivables
Pledging
Receivables
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END OF CHAPTER 9