ACG-2021 Lecture Notes - Lecture 8: Promissory Note, Accounts Receivable, Current Asset
Document Summary
Amounts due from individuals and companies that are expected to be collected in cash. Accounts receivable - amounts customers owe on account that result from the sale of goods and services. Almost always qualify as trade receivables; almost never charge interest. Notes receivable - written promise (formal instrument) for amount to be received. Sometimes qualify as trade receivables; almost always charge interest. Other receivables - nontrade receivables including interest, loans to of cers, advances to employees, interest (non-trade interest), and income taxes refundable. Two accounting issues: recognizing accounts receivable, valuing accounts receivable. Service organization - records a receivable when it performs service on account. Merchandiser - records accounts receivable at the point of sale of merchandise on account. Sales on account raise the possibility of accounts not being collected. Seller records losses that result from expanding credit as bad debts expense which is classi ed as an operating expense on the income statement. Receivable not stated at net realizable value.
