ACCT 3001 Chapter : Chapter 7 Course Notes
Document Summary
Recognition of accounts receivable: trade discounts vs. cash discounts. Trade discounts: reductions from the list price, not recognized in the accounting records, customers are billed net of discounts. Cash discounts (sales discounts: inducements for prompt payment, gross method vs. net method. Webster sells ,000 worth of merchandise on 9/18/2015 with terms 3/10, n/30. ,000 worth of the merchandise on 9/23/2015 and the balance owed on 10/15/2015. Record all journal entries using (a) the gross method and (b) the net method. Chapter 7 receivables: non-recognition of interest element. A company should measure receivables in terms of their present value. In practice, companies ignore interest revenue related to accounts receivable because the amount of the discount is not usually material: valuation of accounts receivable. Reporting receivables: classification (current or long-term based on due date, valuation (net realizable value) Uncollectible accounts receivable: sales on account raise the possibility of accounts not being collected.
