MGAB01H3 Lecture Notes - Lecture 10: Accounts Receivable

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Published on 7 Nov 2018
School
Course
Professor
MGAB01 Week 10
The midterm distribution: top 25% - 79 above
B’s – 60 above
Chapter6
Review
-Cash/sales discount: discount give to pay whole cash.
Reason: make people actually pay money on time, then the firm don’t need to
follow
-Credit card discounts: credit card company guarantee to pay. So the firm don’t
need to worry about receivable.
All of those discount’s purpose: actually, get to pay
Example:
Account receivable
1000
revenue
1000
Now, the cash discount is 2% when you pay early
cash
980
Sales discount
20
Account receivable
1000
-Sales return
Account receivable
1000
revenue
1000
Cost of goods
900
inventory
900
Now if customer return the goods,
inventory
900
Cost of goods
900
Sales return
1000
Account receivable
1000
Why we list sales return instead of just put back to origin account: via doing this
we can follow the items situation and know how sales people do.
Accounting for bad debts
Bad debt: account receivable over time and has few possibility to get paid.
AR Gross
Minus Allowance for bad debt
= AR -net
We should estimate bad debt before and decide allowance for bad debt
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