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					           Chapter 8
   Receivables - Reporting

Any asset – expected __________.
AR – expected amt to be _______.
NET REALIZABLE VALUE - _____


                                   1
                   NRV


Gross asset value less
______________________________.
(allowance for doubtful accounts).



                                     2
          AR - EXAMPLE

AR = $10,000
EST’D uncollectible amount $900.
Balance Sheet –
Assets: AR      $_______
     Less Alow. ______
    Net          $________ _____

                                   3
        Why Allowance Account
                        AR – controlling account
                       10,000

                          Subsidiary Ledger
    A-co.      B-co.       C-co.     D-co          E-co.
2,000       1,000         800      6,000           200

AR (Gen. Ledger) = Sum of Sub. Ledger
10,000          = 2,000 + 1,000 + 800 + 6,000 + 200



                                                           4
          Why Allowance Account
ASSETS                    = L + CC   +    RE
 AR        Allow. (neg)                  Bad Debt Exp.
10 ,000    -900                            -900



      ____________.




                                                         5
        Co. C. – defaults $800
    ASSETS               = L + CC   +    RE
  AR       Alow. (neg)              Bad Debt Exp.
  10 ,000  -900                        -900

WO -____     ___                          NA

   _______   _____




                                                    6
            Co. C. – defaults $800
     ASSETS
   AR       Alow. (neg)      NRV
   10 ,000  -900             _____ (10,000-900)
WO -800        800

    9,200      100
                             _______ (9,200 – 100)
Writing off an individual account _____________ the
______________________.


                                                      7
                                LG 1

  CLASSIFYING
  RECEIVABLES
    Accounts receivable
– Short term credit
– ______________ days
      Notes receivable
– Longer term
– May be ___ year or more
     Other receivables

                            8
                              LG 4



ALLOWANCE METHOD


     Bad debt expense
    estimated at end of
    accounting period.




                          9
                                                                   LG 4



             ENTRY 1/21: Write-off

  SCF   BS    IS       1/21 Allowance                800
                            Acct Receivable: C co.         800

Writing off an account receivable
   Has __ effect on cash flows
   Has __ effect on total assets on balance sheet
   Has ___ effect on income statement


                                                              10
                                             LG 4


    ESTIMATING
  UNCOLLECTIBLES

2 methods to estimate uncollectibles
  – Method #1
     • Based on % of sales
  – Method #2
     • Based on analyzing receivables



                                        11
                 LG 4



EXHIBIT 2




            12
                                                           LG 4


ADJUSTING ALLOWANCE:
               Debit Balance




 Allowance for Doubtful Accounts needs a balance of
                     $3,390
              $3,390 + 300 = $3,690


                                                      13
                                                           LG 4



   ENTRY 8/31: Adjustment #2

8/31 Bad Debt Expense                      3,690
         Allowance for Doubtful Accounts           3,690




                                                      14
                                                           LG 4


               EXERCISE 8-9b
At the end of the current year, accounts receivable
had a debit balance of $775,000 and net sales is
$6,000,000.
Calculate the provision for uncollectibles if the
allowance has a credit balance of $3,750 and
aging of A/R indicates doubtful accounts =
$18,350.
                  BDE = $__________


                                                      15
                                                           LG 4


               EXERCISE 8-9d
At the end of the current year, accounts receivable
had a debit balance of $775,000 and net sales is
$6,000,000.
Calculate the provision for uncollectibles if the
allowance has a debit balance of $5,050 and
aging of A/R indicates doubtful accounts =
$31,400.
                  BDE = $__________


                                                      16
LEARNING GOALS


    Describe nature,

6   characteristics,
    accounting for notes
    receivable.



                           17
                                            LG 6



   NOTES RECEIVABLE

• Have a maturity date
  – Due date for payment
• Pay interest
  Interest = Principal * Rate * Time
• Time is expressed as part of year


                                       18
                                             LG 6



              EXAMPLE

A company accepted a 12%, 30-day note
receivable with a principal amount of
$6,000.
Interest due is
            $6,000 * .12 * 30/365
            Interest due is $59.18
                                        19
LEARNING GOALS


    Compute, interpret


9   accounts receivable
    turnover, number days
    sales in receivables.



                            20
                                                    LG 9

 ACCOUNTS RECEIVABLE
      TURNOVER

Accounts receivable turnover measures how
frequently accounts receivable are collected
              A/R Turnover =
       _________/________________



                                               21
                                               LG 9



STARBUCKS’ TURNOVER
                 2004        2003 2002
Net Sales   $5,294.2    $4,075.5 ------

Net A/R     140.2       114.4     $97.6

            2004 A/R turnover =
       $________________________ =
                 _______

                                          22
                                                   LG 9




What is Starbucks’
accounts receivable
turnover for 2003?



                 2003 A/R turnover =
             $4,075.5 /{(114.4 + 97.6)/2} =
                          38.5


                                              23
                                       LG 8



ANALYSIS: Turnover

 Trend for accounts receivable
           turnover:
Starbucks improved its accounts
  receivable turnover in 2004.




                                  24
                                                           LG 9



   DAYS’ SALES in AR
Days in sales estimates the length of time accounts
  receivable have been outstanding on average.
               Days’ Sales in AR =
           ______________________
                 Or – 365 / ____




                                                      25
                                            LG 9

        STARBUCKS
      DAYS’ SALES in AR

Starbucks’ average days’ sales in AR
for 2004 is:
       ($127.3/ 14.5) = OR 365/41.6
                 ________

                                       26
                                                 LG 9




What is Starbucks’ days
  in sales for 2003?



         Starbucks’ average days in sales
                   for 2003 is
                 ($106/ 11.2) =
                    ________

                                            27
                                          LG 8



ANALYSIS: Days in Sales

 Starbucks collected its accounts
 receivable almost 1 day faster in
  2004 than in 2003. 9.5 – 8.8 =
     .7 DAYS or .7 X $14.5 =
        $________ million



                                     28

				
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posted:5/2/2013
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