MGMT 1A Lecture Notes - Lecture 11: Accounts Receivable
Document Summary
Credit department: determines credit worthiness of each prospective customer. Uncollectible accounts: results of errors in judgement or because of unanticipated events. Accounts receivable: trade discounts: large quantity purchases, sales discounts: prompt payment. Allowance for doubtful accounts: re ects best estimate of probable losses in accounts receivable. Direct write-off method: write-off bad debt as it occurs (not acceptable in gaap) Allowance method: an estimate of expected uncollected accounts: aging of accounts receivable, percent of sales, comparison of aging and percentage of sales methods. Financial ratios based on accounts receivable: receivable percentages = average accounts receivable / sales. Allowance for doubtful accounts / accounts receivable: turnover ratio = sales / average accounts receivable. Average days to turnover = 365 / turnover times.
