COMM321 Chapter Notes - Chapter 7: Finance Charge, Promissory Note, Effective Interest Rate
13 Apr 2017
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Short-term receivables are reported at their net realizable value (nrv): the net amount of cash expected to be collected, which is not necessarily the amount legally receivable. Gross accounts receivable less estimated uncollectible accounts and any returns, allowances, or cash discounts. Loans and receivables are impaired if there is significant adverse change in expected configuration of cash flows (i. e. timing or amount) Records estimated impairment to properly value accounts receivables and record the bad debts as expense in the same accounting period as the sale (matching concept) Receivables are reported at their estimated net realizable value i. e. , net of an allowance for. The estimate of uncollectible accounts may be based on: Allowance procedure only: management frequently analyses accounts receivable, estimates uncollectible amounts and adjusts the allowance for. Doubtful accounts: mix of procedures: initially may use percentage of sales (or net sales), but must still adjust at year-end to ensure that allowance for doubtful accounts is appropriate.
