Business Administration 2257 Chapter Notes - Chapter 8: General Ledger, Accounts Receivable, Accrual
9 Jan 2018
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Receivables are amounts that are due to the business from its customers or other entities. For service company, receivable is recorded when a service is provided on account. For merchandising company, receivable is recorded at the point of sale of merchandise. Sometimes may provide discounts if the customer pays quickly to entice them to give you your money: original entry: debit accounts receivable, credit sales (2/10, n/30, adjustment: debit cash/sales discounts, credits accounts receivable. When a customer uses a company credit card, you effect the accounts receivable account: debit accounts receivable, credit sales, they should not have any service fees since not dealing with the bank. Credit losses from uncollectible receivables are debited to an account called bad debt expense (used instead of contra sales account) Companies must measure when the accounts receivable should be recognized as bad debts expense. If they wait, they could end up recording it in a different period from the revenue.
