Chapter 5 - Receivables and sales. In this chapter you will learn: Recognize accounts receivable; calculate net revenues using discounts, returns, and allowances; record an allowance for future uncollectible accounts; use the aging method to estimate future uncollectible accounts; apply the procedure to write off accounts receivable as uncollectible; | Receivables and Sales Chapter 5 1 Learning Objectives Recognize accounts receivable Calculate net revenues using discounts, returns, and allowances Record an allowance for future uncollectible accounts Use the aging method to estimate future uncollectible accounts Apply the procedure to write off accounts receivable as uncollectible Learning Objectives Contrast the allowance method and direct write-off method when accounting for uncollectible accounts Apply the procedure to account for notes receivable, including interest calculation Calculate key ratios investors use to monitor a company’s effectiveness in managing receivables Estimate uncollectible accounts using the percentage-of-credit-sales method Part A Recognizing Accounts Receivable Companies sometimes provide goods or services to customers, not for cash, but on account. Accounts receivable represent the amount of cash owed to a company by its customers from the sale of products or services on account. 4 Learning Objective 1 Recognize accounts receivable Credit Sales Transfer products and services to a customer today and collecting payment in the future Also known as sales on account or services on account Common for large business transactions In a credit sale, products and services are transferred to a customer today while bearing the risk of collecting payment from that customer in the future. Credit sales transactions are also known as sales on account or services on account. Credit sales are common for large business transactions. Businesses usually prefer to make multiple purchases using credit and then make a single payment at the end of the period. Businesses may also want to buy on credit because they have insufficient cash at the moment, or the transaction amount exceeds typical credit card limits. The benefit of extending credit is that the seller makes it more convenient for the buyer to purchase goods and services. Credit sales should benefit the seller by increasing profitability of the . | Receivables and Sales Chapter 5 1 Learning Objectives Recognize accounts receivable Calculate net revenues using discounts, returns, and allowances Record an allowance for future uncollectible accounts Use the aging method to estimate future uncollectible accounts Apply the procedure to write off accounts receivable as uncollectible Learning Objectives Contrast the allowance method and direct write-off method when accounting for uncollectible accounts Apply the procedure to account for notes receivable, including interest calculation Calculate key ratios investors use to monitor a company’s effectiveness in managing receivables Estimate uncollectible accounts using the percentage-of-credit-sales method Part A Recognizing Accounts Receivable Companies sometimes provide goods or services to customers, not for cash, but on account. Accounts receivable represent the amount of cash owed to a company by its customers from the sale of products or services on account. 4 Learning Objective 1 .
