ACCT 3001 Chapter : Chapter 7
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Recognition of accounts receivable: trade discounts vs. cash discounts. Trade discounts: reductions from the list price, not recognized in the accounting records, customers are billed net of discounts. Cash discounts: inducements for prompt payment, gross method vs. net method. Webster sells ,000 worth of merchandise on 9/18/2010 with terms 3/10, n/30. The cost of the merchandise to webster is ,000. Webster receives payment for ,000 worth of the merchandise on 9/23/2011 and the balance owed on 10/15/2011. A company should measure receivables in terms of their present value. In practice, companies ignore interest revenue related to accounts receivable because the amount of the discount is not usually material. Reporting receivables: classification, valuation (net realizable value) Uncollectible accounts receivable: sales on account raise the possibility of accounts not being collected. Sales) income statement approach: percentage of receivable emphasizes net realizable value (receivables less. Allowance for doubtful accounts) balance sheet approach. Akc, inc. provides the following data as of december 31, 2011:
