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Lecture Fundamental accounting principles (20/e): Chapter 9 - Wild, Shaw, Chiappetta

Chapter 9 - Accounting for receivables. After completing this chapter you should be able to: Describe accounts receivable and how they occur and are recorded; describe a note receivable, the computation of its maturity date, and the recording of its existence; explain how receivables can be converted to cash before maturity. | ACCOUNTING FOR RECEIVABLES Chapter 9 Chapter 9: Accounting for Receivables SALES ON CREDIT C1 On July 1, TechCom had a credit sale of $950 to CompStore and a collection of $720 from RDA Electronics from a prior credit sale. To see how accounts receivable from credit sales are recognized in the accounting records, we look at two transactions on July 1 between TechCom and its credit customers. The first is a credit sale of $950 to CompStore that is recorded with a debit to Accounts Receivable--CompStore and a credit to Sales. The second transaction is a collection of $720 from RDA Electronics from a prior credit sale. The cash receipt from a RDA Electronics is recorded with a debit to Cash and a credit to Accounts Receivable—RDA Electronics. SALES ON CREDIT C1 The credit sale is posted with both a debit to the Accounts Receivable account in the general ledger and a debit to Accounts Receivable—CompStore customer account in the accounts receivable ledger. The cash receipt from RDA Electronics is posted as a credit to the Accounts Receivable account in the general ledger and to the Accounts Receivable—RDA Electronics customer account in the accounts receivable ledger. Posting debits or credits to Accounts Receivable in two separate ledgers does not violate the requirement that debits equal credits. The equality of debits and credits is maintained in the general ledger. The accounts receivable ledger is a supplementary record providing information on each customer. The $3,230 sum of the individual accounts equals the debit balance of the Accounts Receivable account in the general ledger. CREDIT CARD SALES Advantages of allowing customers to use credit cards: Customers’ credit is evaluated by the credit card issuer. The risks of extending credit are transferred to the credit card issuer. Cash collections are quicker. Sales increase by providing purchase options to the customer. C1 Many companies allow their customers to pay for products and services using third-party . | ACCOUNTING FOR RECEIVABLES Chapter 9 Chapter 9: Accounting for Receivables SALES ON CREDIT C1 On July 1, TechCom had a credit sale of $950 to CompStore and a collection of $720 from RDA Electronics from a prior credit sale. To see how accounts receivable from credit sales are recognized in the accounting records, we look at two transactions on July 1 between TechCom and its credit customers. The first is a credit sale of $950 to CompStore that is recorded with a debit to Accounts Receivable--CompStore and a credit to Sales. The second transaction is a collection of $720 from RDA Electronics from a prior credit sale. The cash receipt from a RDA Electronics is recorded with a debit to Cash and a credit to Accounts Receivable—RDA Electronics. SALES ON CREDIT C1 The credit sale is posted with both a debit to the Accounts Receivable account in the general ledger and a debit to Accounts Receivable—CompStore customer account in the accounts receivable ledger. The cash receipt from RDA .