西方财务会计Chaer3.pptx

Chapter 6Accounts Receivable And Notes Receivable IntroductionIn addition to cash, cash equivalents, and short-term investments, the current (liquid ) assets of an entity include receivables that result from credit sales to customers. These receivables include (1) accounts receivables and (2) notes receivable. Accounts Receivable Accounts receivable are relatively liquid asset, usually converting into cash within a period of 30 to 60 days. Therefore, accounts receivable from customers are classified as current assts and are listed in the balance sheet immediately after cash and short-term investments. Accounts ReceivableThree Important Concepts about A/RCash Discounts(Sales Discounts)Sales Returns and AllowancesBad Debts (Uncollectible Accounts) Uncollectible Accounts When a company grants credit to its customers, there usually are a few who do not pay what they promised. The accounts of such customers are called uncollectible accounts or bad debts. The bad debts amounts that cannot be collected is an expense of selling on credit. When the bad debt expense is recorded, a contra asset account – Allowance for uncollectible accounts is established to report accounts receivable in the balance sheet at the amounts expected to be collected. Uncollectible Accounts ReceivableWhen credit is extended, some amount of uncollectible receivables is generally inevitable.If uncollectible receivables are probable and can be estimated, an estimate should be made of the amount uncollectible and recorded in the period in which the revenue was produced (allowance method).We can also write off uncollectible accounts directly to an expense account if we don’t want to maintain an allowance account for accounts receivable(direct writing off method) Allowance MethodWhen we estimate the amount of our uncollectible receivables, we make the following adjustingentry:The Allowance for Doubtful Accounts is a contra account to Accounts Receivables. Allowance MethodAs accounts become uncollectible,