ACCY112 Accounting Week 3 Lecture notes-students.pptx

Managing Current Assets: Receivableschapter 18 Week Two Autumn 2015 ACCY112 Autumn 2015 Describe the different types of Accounts receivables Define accounts receivable, and state how accounting recognises and values them Nature of bad and doubtful debts demonstrate how to account for them The principles involved in the management control of accounts receivable Nature of the bills receivable and how to account for them ACCY112 Autumn 2015 WHAT DO YOU REMEMBER ABOUT ACCOUNTS RECEIVABLE? Current Assets Normal balance: Debit Related to Credit Sales Part of Liquidity May turn into Cash in a very near future ACCY112 Autumn 2015 What do you remember about credit Sales transaction? Account to be Debited and credited? What do you remember about Return on credit Sales? Account to be Debited and Credited? WHAT DO YOU REMEMBER ABOUT ACCOUNTS RECEIVABLE? ACCY112 Autumn 2015 Accounts receivable (Trade receivables) Bills receivable (Notes receivable) Money to be received in near future from customers Credit sales transactions by debiting it and crediting Sales revenue Evidenced by Sales invoice and receiving report Money to be received in near future from customers From sales or an exchange from Accounts Receivables Evidenced by a formal written promise to pay Could cash the bill at the bank before the due date ACCY112 Autumn 2015 TRADES RECEIVABLE AND PAYABLE Usually refer to receivables and payables arising in the regular transactions with customers and suppliers. Trade Receivables = Accounts Receivable. Installment Receivable Trade Payable = Accounts Payable. Payment of Trade Receivables and Payables is normally 30 to 60 days ACCY112 Autumn 2015 BAD AND DOUBTFUL DEBTS Risk of doing business on credit Minimised through credit checks Unpaid amounts represent a business expense Written off periodically ACCY112 Autumn 2015 BAD AND DOUBTFUL DEBTS Methods for recognising Uncollectible Accounts (bad debts); The allowance method employs estim