Cash
6542– SRI HANDAYANI, SE, MM, MAk, CPMA
PROGRAM STUDI MANAJEMEN & AKUNTANSI FAKULTAS EKONOMI DAN BISNIS
UNIVERSITAS ESA UNGGUL FEB103
PENGANTAR AKUNTANSI I +
LAB
Mahasiswa mampu memahami
Akuntansi piutang tercatat, dan
menganalisis transaksi piutang
tercatat
TKT306 - Perancangan Tata Letak Fasilitas 6623 - Taufqur Rachman 2
Chapter
8
Receivables
Accounting,
21st EditionWarren Reeve Fess
PowerPoint Presentation by Douglas Cloud
Professor Emeritus of Accounting Pepperdine University
© Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved.
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1.
List the common classifcations of
receivables.
2.
Summarize and provide examples of
internal control procedures that
apply to receivables.
3.
Describe the nature of and the
accounting for uncollectible
receivables.
4.
Journalize the entries for the
allowance method of accounting for
uncollectibles, and estimate
uncollectible receivables based on
sales and on an analysis of
receivables.
Objectives
Objectives
After studying this
chapter, you should
be able to:
After studying this
chapter, you should
5.
Journalize the entries for the direct
write-of of uncollectible receivables.
Objectives
Objectives
6.
Describe the nature and characteristics
of promissory notes.
7.
Journalize the entries for notes
receivable transactions.
8.
Prepare the Current Assets
presentation of receivables on the
balance sheet.
9.
Compute and interpret the accounts
Classification of Receivables
Accounts Receivable
—used for selling
merchandise or services on credit, and normally
expected to be collected in a relatively short
period.
Notes Receivable—
used to grant credit on the
basis of a formal instrument of credit, called a
promissory note.
Acctg.
Separating the Receivable Functions
Separating the Receivable Functions
Credit Info.
Credit Approval
Uncollectible Receivables
Uncollectible Receivables
Companies often sell
their receivables to other
companies. This
transaction is called
factoring
the
receivables, and the
buyer of the receivables
is called a
factor
.
Companies often sell
their receivables to other
companies. This
transaction is called
factoring
the
receivables, and the
buyer of the receivables
Uncollectible Receivables
Uncollectible Receivables
This method is consistent with the
matching principle.
Management makes an
estimate
each year of the
portion of accounts receivable that may not be
collectible.
Uncollectible Accounts Expense
is debited and
Allowance for Doubtful Accounts
is credited.
Actual accounts that prove to be uncollectible are
debited to
Allowance for Doubtful Accounts
and
credited to
Accounts Receivable
.
The Allowance Method
The Allowance Method
The Allowance Method
Dec. 31 Uncollectible Accounts Expense 4 000 00
Allowance for Doubtful Accounts 4 000 00
On December 31, Cynthia Richards estimates
that a total of $4,000 of the $105,000 balance in
her company’s
Accounts Receivable
will
eventually be uncollectible.
On December 31, Cynthia Richards estimates
that a total of $4,000 of the $105,000 balance in
her company’s
Accounts Receivable
will
eventually be uncollectible.
The net amount that is
expected to be collected,
$101,000 ($105,000 –
$4,000), is called the
net
realizable value (NRV)
.
The net amount that is
expected to be collected,
$101,000 ($105,000 –
$4,000), is called the
net
realizable value (NRV)
.
The Allowance Method
The Allowance Method
The adjusting entry
reduces receivables to
the NRV and matches
uncollectible expenses
with revenues.
The adjusting entry
reduces receivables to
the NRV and matches
uncollectible expenses
The
adjusting
entry fills
the bucket.
The
adjusting
entry fills
the bucket.
Allowanc
e for
Doubtful
Accounts
The Allowance Method
Writing off
accounts
empties the
bucket.
Writing off
accounts
empties the
bucket.
The Allowance Method
On January 21, John
Parker’s account totaling
$610 is considered to be
uncollectible.
On January 21, John
Parker’s account totaling
$610 is considered to be
uncollectible.
Jan. 21 Allowance for Doubtful Accounts 610 00
Accounts Receivable—John Parker 610 00
To write off the uncollectible account.
The Allowance Method
On June 10, the written-off
account is collected.
On June 10, the written-off
account is collected.
Jun. 10 Accounts Receivable—John Parker 610 00
To reinstate the account written off on Jan. 21.
An entry is made to reinstate
John Parker’s account.
An entry is made to reinstate
John Parker’s account.
Allowance for Doubtful Accounts 610 00
The Allowance Method
A second entry is made to
record receipt of the cash.
A second entry is made to
record receipt of the cash.
Jun. 10 Cash 610 00
Accounts Receivable—John Parker 610 00 To record collection on
account.
The Allowance Method
Estimating Uncollectible Accounts Expense
Estimating Uncollectible Accounts Expense
1.
Estimate based on a percentage of sales.
If credit sales for the period are $300,000 and
it is estimated that 1% will be uncollectible,
the
Uncollectible Accounts Expense
is $3,000.
The allowance method uses two ways to
estimate the amount debited to
Uncollectible
Accounts Expense
.
The Allowance Method
Dec. 31 Uncollectible Accounts Expense 3 000 00
Allowance for Doubtful Accounts 3 000 00
Adjusting Entry
Based on a Percentage of Sales
Based on a Percentage of Sales
The Allowance Method
Estimating Uncollectible Accounts Expense
Estimating Uncollectible Accounts Expense
The allowance method uses two ways to
estimate the amount debited to
Uncollectible
Accounts Expense.
2.
Estimate based on analysis of receivables.
If it is estimated that $3,390 of the receivables
will be uncollectible and the
Allowance for
Uncollectible Accounts
currently has a balance of
$510, the
Uncollectible
Accounts Expense
must be
debited for $2,880 ($3,390 – $510).
The Allowance Method
Dec. 31 Uncollectible Accounts Expense 2 880 00
Allowance for Doubtful Accounts 2 880 00
Adjusting Entry
Based on an Analysis of Receivables
Based on an Analysis of Receivables
The Allowance Method
Accounts Receivable Aging and Uncollectibles
Not Days Past Due
Past over
Customer Balance Due 1-30 31-60 61-90 91-180 181-365 365
Ashby & Co. $ 150 $ 150
B. T. Barr 610 $ 350 $260
Brock Co. 470 $ 470
Saxon Woods 160 160
Total $86,300 $75,000 $4,000 $3,100 $1,900 $1,200 $800 $300
Total accounts receivable
shown by age.
2% 5% 10% 20% 30% 50% 80%
Uncollectibles PERCENT
Uncollectible percentages based on
experience and industry averages.
Accounts Receivable Aging and Uncollectibles
Not Days Past Due
Past over
Customer Balance Due 1-30 31-60 61-90 91-180 181-365 365
Ashby & Co. $ 150 $ 150
B. T. Barr 610 $ 350 $260
Brock Co. 470 $ 470
Saxon Woods 160 160
2% 5% 10% 20% 30% 50% 80%
Uncollectibles PERCENT
AMOUNT $3,390 = $1,500 $200 $310 $380 $360 $400 $240
Accounts Receivable Aging and Uncollectibles
Not Days Past Due
Past over
Customer Balance Due 1-30 31-60 61-90 91-180 181-365 365
Ashby & Co. $ 150 $ 150
B. T. Barr 610 $ 350 $260
Brock Co. 470 $ 470
Saxon Woods 160 160
Year-End Adjustment for Uncollectibles
Year-End Adjustment for Uncollectibles
General Ledger
Accounts Receivable 86,300
A
Allowance for Doubtful Accts. 510
Uncollectible Accts. Expense
Accounts receivable $86,300 Less allowance for
doubtful accounts 3,390 Net realizable value $82,910
Balance Sheet
A
Balances before adjustment
AYear-end adjustment:
$3,390 – $510 = $2,880
B
2,880
B
2,880 B
Balance after adjustment
C3,390 C
Accounting for Uncollectible Accounts Receivable
This method is not consistent with the matching principle.
Accounts that prove to be uncollectible are written off in the year they become worthless.
Uncollectible Accounts Expense is debited and
Accounts Receivable is credited for each such transaction.
The Direct Write-Off Method
The Direct Write-Off Method
On May 10, D. L. Ross’ account was
determined to be uncollectible. The
$420 balance is written off the books.
On May 10, D. L. Ross’ account was
determined to be uncollectible. The
$420 balance is written off the books.
May 10 Uncollectible Accounts Expense 420 00Accounts Receivable—D. L. Ross 420 00
In November, D. L. Ross remits a check
for $420 in payment of his account.
In November, D. L. Ross remits a check
for $420 in payment of his account.
Nov. 1 Accounts Receivable—D. L. Ross 420 00
Uncollectible Accounts Expense 420 00
To reinstate account written off on May 10.
The Direct Write-Off Method
The Direct Write-Off Method
A second entry is needed to record
receipt of the cash.
A second entry is needed to record
receipt of the cash.
Nov. 1 Cash 420 00
Accounts Receivable—D. L. Ross 420 00
To record collection on account.
The Direct Write-Off Method
The Direct Write-Off Method
Notes Receivable
THE ORDER OF ____________________________________________ Judson Company_________________________________________________DOLLARS
Two thousand fve hundred
00/100---PAYABLE AT ______________________________________________City National Bank VALUE RECEIVED WITH INTEREST AT ____10%
2,500.0 0
NO. _______ DUE___________________14 June 14, 2006
TREASURER, WILLIARD COMPANY
H. B. Lane
Payee
Payee
Maker
a specific amount of money (principal)
to a specific person or company (payee)
at a specific place
on a specific date or upon demand
plus interest at a specific percentage of
the principal (face) amount per year
a specific amount of money (principal)
to a specific person or company (payee)
at a specific place
on a specific date or upon demand
plus interest at a specific percentage of
the principal (face) amount per year
A promissory note is a written
document containing a promise to pay:
The date a note is to be paid is
called the
due date.
It is also
referred to as the maturity date.
The date a note is to be paid is
called the
due date.
It is also
referred to as the maturity date.
Let’s determine the due
date for a 90-day note
dated March 16.
Let’s determine the due
date for a 90-day note
dated March 16.
Total days in note
90 days
Number of days in March
31
Issue date of note
March 16
Remaining days in March
–15 days
75 days
Number of days in April
–30 days
45 days
Number of days in May
–31 days
Residual days in June
14 days
Answer: June 14
Notes Receivable
Notes Receivable
The amount that is due at the
maturity or due date is called
the
maturity value
.
The amount that is due at the
maturity or due date is called
Received a $6,000, 12%, 30-day note
dated November 21, 2006 in settlement
of the account of W. A Bunn Co.
Received a $6,000, 12%, 30-day note
dated November 21, 2006 in settlement
of the account of W. A Bunn Co.
Principal + Interest = Maturity Value
$6,000 + $60.00 = $6,060.00
Principal x Rate x Time = Interest
$6,000 x 12% x 30/360 = $60.00
Interest Calculation
Maturity Value Calculation
Accounting for Notes Receivable
Accounting for Notes Receivable
A $6,000 30-day, 12% note dated
November 21 is received from W. A Bunn
Company in exchange for merchandise.
A $6,000 30-day, 12% note dated
November 21 is received from W. A Bunn
Company in exchange for merchandise.
Nov. 21 Notes Receivable 6 000 00Sales 6 000 00
On December 21, when the note matures,
the firm receives $6060 from W. A. Bunn
Company ($6,000 plus $60 interest).
On December 21, when the note matures,
the firm receives $6060 from W. A. Bunn
Company ($6,000 plus $60 interest).
Dec. 21 Cash 6 060 00
Notes Receivable 6 000 00
Received principal and interest on matured note.
Interest Revenue 60 00
Accounting for Notes Receivable
If W. A. Bunn Company fails to pay the note on
the due date, it is considered a
dishonored note
receivable
. The note and interest are transferred
to the customer’s account.
If W. A. Bunn Company fails to pay the note on
the due date, it is considered a
dishonored note
receivable
. The note and interest are transferred
to the customer’s account.
Dec. 21 Accounts Receivable—Bunn Co. 6 060 00
Notes Receivable 6 000 00
To record dishonored note and interest.
Interest Revenue 60 00
Accounting for Notes Receivable
A 90-day, 12% note dated December 1, 2006,
is received from Crawford Company to settle
its account, which has a balance of $4,000.
A 90-day, 12% note dated December 1, 2006,
is received from Crawford Company to settle
its account, which has a balance of $4,000.
Dec. 1 Notes Receivable 4 000 00 Accounts Receivable—Crawford
Company 4 000 00
Received note in settlement of account.
Accounting for Notes Receivable
Assuming that the accounting period
ends on December 31, an adjusting entry
is required to record the accrued interest
of $40 ($4,000 x 0.12 x 30/360).
Assuming that the accounting period
ends on December 31, an adjusting entry
is required to record the accrued interest
of $40 ($4,000 x 0.12 x 30/360).
Dec. 31 Interest Receivable 40 00
Interest Revenue 40
00 Adjusting entry for accrued interest.
Accounting for Notes Receivable
On March 1, 2004, $4,120 is received for
the note ($4,000) and interest ($120).
On March 1, 2004, $4,120 is received for
the note ($4,000) and interest ($120).
Mar. 1 Cash 4 120 00
Notes Receivable 4 000
00
Interest Receivable 40
00
Interest Revenue 80
00
Received payment on note and interest.
Accounting for Notes Receivable
Receivables on
the Balance
Assets
Current assets:
Cash $119,500
Notes receivable 250,000 Accounts receivable $445,000
Less allowance for
doubtful accounts 15,000430,000 Interest receivable 14,500
Merchandise inventory 714,000