ADM 1340 Lecture Notes - Lecture 8: Subledger, Debit Card, General Ledger

58 views5 pages

orchidshark991

3 May 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Chapter 8

Study Objectives

• SO 1: identify the types of receivables and record accounts receivable transactions

• SO 2: account for bad debts

• SO 3: account of notes receivable

• SO 4: explain the statement presentation of receivables

• SO 5: Apply the principles of sound accounts receivable management

Types of Receivables

• Amounts due to a business from its customers or other entities expected to be collected in

cash

• Frequently classified as

o Accounts receivable - amounts owed by customers due to the sale of goods and

services

o Notes receivable - formal credit instrument (written promise to pay)

o Other receivable - interest receivable, loans and advances to employees,

recoverable sales tax, income tax receivable, and the like

Accounts Receivable

• A receivable is recorded when service is provided on account or at point of sale of

merchandise on account

• A receivable is reduced when cash is collected, a sale discount is taken, or the

merchandise is returned by the customer

Nonbank Credit Card Receivables

• Bank credit card and debit card transactions recorded as cash

• Nonbank (company) credit cards recorded as Accounts Receivable

o Collections usually outsourced and sent to a credit card company for

reimbursement

Accounts Receivable Subsidiary Ledger

• Subsidiary ledger is a group of accounts that share a common characteristics (i.e. they are

all receivable accounts)

• The subsidiary ledger for accounts receivable provides the detail that support the total

balance for accounts receivable in the general ledger

o The single accounts receivable account in the general ledger is the control account

find more resources at oneclass.com

Unlock document

This preview shows pages 1-2 of the document.
Unlock all 5 pages and 3 million more documents.

Already have an account? Log in

Interest Revenue

• If a customer does not pay in full within a specified period of time (usually 30 days), an

interest (financing) charge may be added to the balance due

o Seller recognizes interest revenue and increases the account receivable balance

owed by the customer

Recording Estimated Uncollectible Accounts

• Some accounts receivable become uncollectible

• Losses from these uncollectible accounts are debited to an account called bad beats

expense

• Bad debts expense is recognized in the sam period that the related sales revenue is

generated

Allowance Method

• This method estimates the uncollectible accounts at the end of each period

• The amount estimated is shown in the allowance for doubtful accounts

o A contra asset account that is shown below accounts receivable

• Note that the allowance is an estimate - it does not show specific customer accounts

Estimating the Allowance

• Most companies use the percentage of receivables basis to determine the allowance

o Estimate what percentage of receivables are likely to be uncollectible

o Apply this percentage to total receivables, or

o Apply this percentage to receivables classified according to the length of time

they have been outstanding (called again the accounts receivables)

• Once the appropriate estimate for uncollectible accounts is determined, an adjusting entry

can be recorded

• The amount of the adjusting entry is the difference between the required balance and the

existing balance in the allowance account

Recording and Reporting Estimated Uncollectible Accounts

• The balance in the allowance of doubtful accounts is deducted from accounts receivable

in the current assets section of the statement of financial position

Recording the Write-Off of an Uncollectible Account

find more resources at oneclass.com

Unlock document

This preview shows pages 1-2 of the document.
Unlock all 5 pages and 3 million more documents.

Already have an account? Log in

ceruleanclam927 and 54 others unlocked

ADM 1340 Full Course Notes

Verified Note

42 documents

Document Summary

Nonbank credit card receivables: bank credit card and debit card transactions recorded as cash, nonbank (company) credit cards recorded as accounts receivable, collections usually outsourced and sent to a credit card company for reimbursement. Recording and reporting estimated uncollectible accounts: the balance in the allowance of doubtful accounts is deducted from accounts receivable in the current assets section of the statement of financial position. Recording the write-off of an uncollectible account: the vice president of finance authorizes a write-off of ,500 owed by t. ebbet. Recording the recovery of an uncollectible account: record in two separate entries. If a written-off account is later collected, the write-off is reversed and the collection recorded. Formula for calculating interest: the basic formula for calculating interest on an interest-bearing note is, the interest rate specified on the note is an annual rate of interest.

Related Questions

Calculate cost of goods available for sale and cost of goodssold for the month.

5. Principles of an efficient and effectiveaccounting information system include all of the followingexcept

a. cost effectiveness.

b. flexibility.

c. useful output.

d. All of these options are principles.

6. Which of the following statements isincorrect?

a. A major consideration in developing an accountingsystem is cost effectiveness.

b. When an accounting system is designed, noconsideration needs to be given to the needs and knowledge of thevarious users.

c. The accounting system should be able toaccommodate a variety of users and changing information needs.

d. To be useful, information must be understandable,relevant, reliable, timely, and accurate.

7. All of the following are advantages ofusing subsidiary ledgers except they

a. eliminate errors in individual accounts.

b. free the general ledger of excessive details.

c. show, in a single account, transactions affectingone customer or one creditor.

d. make possible a division of labor.

8. Which of the following is notan advantage of a subsidiary ledger?

a. Shows transactions affecting one customer or onecreditor in a single account.

b. Helps locate errors in individual accounts.

c. Puts greater detail in the general ledger.

d. Makes possible a division of labor.

9. Credit sales of assets other thanmerchandise are recorded in the

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. sales journal.

10. When the totals of the sales journal are posted at the end of themonth, there will be credits to

a. Sales and Merchandise Inventory and debits toAccounts Receivable and Cost of Goods Sold.

b. Accounts Receivable and Cost of Goods Sold anddebits to Sales and Merchandise Inventory.

c. Sales and debits to each individual customeraccount.

d. the Sales account only, and no debits.

11. TheOther Accounts column of a multi-column journal is often referredto as the

a. Sundry Accounts column.

b. Controlling Account column.

c. Credit Account column.

d. Debit Account column.

12. Companies record credit purchases of equipment or supplies inthe

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. one-column purchases journal.

13. Inthe expanded purchases journal, debits are made in whichcolumns?

a. Accounts Payable, Merchandise Inventory, andOffice Supplies

b. Merchandise Inventory, Office Supplies, and StoreSupplies

c. Cash, Office Supplies, and Store Supplies

d. Accounts Payable, Cash, and MerchandiseInventory

14. Ifa customer takes a sales discount, an entry is made in the

a. cash receipts journal.

b. sales journal.

c. cash payments journal.

d. general journal.

15. Claimsfor which formal instruments of credit are issued as proof of thedebt are

a. accounts receivable.

b. interest receivable.

c. notes receivable.

d. other receivables.

16. Interestis usually associated with

a. accounts receivable.

b. notes receivable.

c. doubtful accounts.

d. bad debts.

17. Thereceivable that is usually evidenced by a formal instrument ofcredit is a(n)

a. trade receivable.

b. note receivable.

c. accounts receivable.

d. income tax receivable.

18. Which ofthe following receivables would not be classified as an"other receivable"?

a. Advance to an employee

b. Refundable income tax

c. Notes receivable

d. Interest receivable

19. Notes oraccounts receivables that result from sales transactions are oftencalled

a. sales receivables.

b. non-trade receivables.

c. trade receivables.

d. merchandise receivables.

20. LarsonCompany on July 15 sells merchandise on account to Stuart Co. for$1,000, terms 2/10, n/30. On July 20 Stuart Co. returns merchandiseworth $400 to Larson Company. On July 24 payment is received fromStuart Co. for the balance due. What is the amount of cashreceived?

a. $600

b. $588

c. $580

d. $1,000

champagnecattle375

Indicate whether the sentence or statement is true or false.

____ 5. The "list" sales price less any trade discount is the amount at which the receivable and the corresponding revenue should be recorded.

____ 6. When factoring accounts receivable without recourse, the buyer (factor) normally assumes the burden of billing and collecting accounts.

____ 7. Transferring receivables without recourse means that the bank or finance company advances cash in return for accounts receivable, but it retains the right to collect from the transferor if debtors fail to make payments when due.

____ 8. The transfer of accounts receivable with recourse should never be accounted for as a sale.

____ 9. Notes arising from loans to customers, officers, employees, and affiliated companies should be reported with the other regular trade notes receivable.

____ 10. An interest-bearing note is written as a promise to pay a face amount plus interest at a specified rate.

beigebat309

Chamberlain Enterprises Inc. reported the following receivablesin its December 31, 2016, year-end balance sheet:


Current assets:
Accounts receivable, net of $28,000 inallowance for uncollectible accounts	$	238,000
Interest receivable		10,700
Notes receivable		300,000

Additional Information:

1.	The notes receivable account consists of two notes, a $65,000note and a $235,000 note. The $65,000 note is dated October 31,2016, with principal and interest payable on October 31, 2017. The$235,000 note is dated June 30, 2016, with principal and 8%interest payable on June 30, 2017.

During 2017, sales revenue totaled $1,380,000, $1,300,000 cashwas collected from customers, and $26,000 in accounts receivablewere written off. All sales are made on a credit basis. Bad debtexpense is recorded at year-end by adjusting the allowance accountto an amount equal to 10% of year-end accounts receivable.

On March 31, 2017, the $235,000 note receivable was discountedat the Bank of Commerce. The bank's discount rate is 10%.Chamberlain accounts for the discounting as a sale.

Required:

Not including sales revenue, what revenue and expense amountsrelated to receivables will appear in Chamberlainâs 2017 incomestatement?

2. What amounts will appear in the 2017 year-end balance sheetfor accounts receivable (net)

3.	Calculate the receivables turnover ratio for 2017.(Round your answer to 1 decimal place.)

ADM 1340 Lecture Notes - Lecture 8: Subledger, Debit Card, General Ledger

ADM 1340 Full Course Notes

Document Summary

Get access

Related Documents

ADM 1340 Lecture Notes - Lecture 8: Accounts Receivable, Financial Statement, Securitization

ADM 1340 Chapter Notes - Chapter 8: Cash Flow, Accounts Receivable, General Ledger

ADM 1340 Chapter 8: Reporting and Analyzing Receivables

Related Questions