BU127 Chapter 8: Chapter #8
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BU127 Full Course Notes
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Chapter #8 - receivables, bad debt expense, interest. Estimate and report the effects of uncollectible accounts. Compute and report interest on notes receivable. Compute and interpret the receivables turnover ratio. Increased wage costs of credit and collection department employees. Delayed receipt of cash because of pay period. Note: often the increased revenue is greater than the increased cost for business customers. The amounts owed to a business by its customers. The amount of credit that will not be collected. This amount is never known in advance. Reports the estimated amount of this periods credit sales that customers will fail to pay. Reduces the cost associated with accounts receivable (uncollectible) The allowance method follows a two-step principle: make an end of period adjustment to record the bad-debt in the period credit sales occur, remove ( write-off ) speci c customer balances when they are known to be uncollectible. The allowance method reports accounts receivable at the net realizable value.
