BU387 Study Guide - Midterm Guide: Petty Cash, Equity Method, Cash Flow
Document Summary
Account receivables (verbal promise to pay, normally 30-60 days) Notes receivables (written promises with specific terms; interest rate, due date: non-trade receivables. Receivables from government (gst recoverable, income tax receivable) Gross method records discount when customers pay within discount period. Sales discount is deducted from sales on income statement. Net method records ar net of discount; discount forfeited by customers are recorded when not taken. Sales discount theoretically forfeited is recorded as other revenue . % of receivables, or aged receivables analysis: mix of procedures: initially uses % sales (or net sales), then adjusts at year-end to ensure ada is appropriate. Existing balance in ada account initially ignored when calculating period"s bad debt expense. Receivables reviewed and adjustment made for appropriate balance: when a specific customer"s ar account is deemed uncollectible, debit ada and credit ar to write off account. Account can be reinstated with reversing entries if payment received after.
