中级会计双语Chap007

2/10,n/30
Discount percent Number of days discount is available Otherwise, net (or all) is due Credit period
7 - 10
Cash Discounts
Gross Method
Sales are recorded at the invoice amounts.
7 - 13
Sales Returns
During the first year of operations, Hawthorne sold $2,000,000 of merchandise that had cost them $1,200,000 (60%). Industry experience indicates 10% return rate. During the year $130,000 was returned prior to customer payment. Record the returns and the end of the year adjustment.
Checks should be signed only by authorized individuals.
Restricted Cash and Compensating Balances
Restricted Cash
Management’s intent to use a certain amount of cash for a specific purpose – future plant expansion, future payment of debt.
Actual Returns Sales returns Accounts receivable Inventory Cost of goods sold (60%) Adjusting Entries Sales returns Allowance for sales returns Inventory-estimated returns Cost of goods sold (60%)
To avoid misstating the financial statements, sales revenue and accounts receivable should be reduced by the amount of returns in the period of sale if the amount of returns is anticipated to be material.
Are recorded net of trade discounts.
7-8
Cash Discounts
increase sales
Cash discounts
encourage early payment increase likelihood of collections
7-9
Cash Discounts
• Bank overdrafts may be offset against other cash accounts.
7-7
Accounts Receivable
Result from the credit sales of goods or services to customers.
Are classified as current assets.
Enhances the reliability and accuracy of accounting data
7-4
Internal Control Procedures
Cash Receipts • Separate responsibilities for receiving cash, recording cash transactions, and reconciling cash balances. • Match the amount of cash received with the amount of cash deposited. • Close supervision of cash-handling and cash-recording activities. Cash Disbursements

◦ Composite Rate
◦ Aging of Receivables
7 - 17
Income Statement Approach
• Focuses on past credit sales to make estimate of bad debt expense.
• Emphasizes the matching principle by estimating the bad dee current period’s credit sales.
7 - 11
Sales discounts forfeited are recorded as interest revenue if payment is received after the discount period.
Cash Discounts
On October 5, Hawthorne sold merchandise for $20,000 with terms 2/10, n/30. On October 14, the customer sent a check for $13,720 taking advantage of the discount to settle $14,000 of the amount. On November 4, the customer paid the remaining $6,000.
7 - 16
xxx xxx
Allowance for Uncollectible Accounts
Accounts Receivable
Less: Allowance for Uncollectible Accounts
Net Realizable Value
Net realizable value is the amount of the accounts receivable that the business expects to collect. Income Statement Approach Balance Sheet Approach
Money market funds
7-3
Treasury bills
Commercial paper
Internal Control
Encourages adherence to company policies and procedures
Promotes operational efficiency Minimizes errors and theft
Normally classified as a selling expense and closed at year-end.
Contra asset account to Accounts Receivable.
Bad debt expense Allowance for uncollectible accounts
7 - 12
Sales Returns
Merchandise may be returned by a customer to a supplier. A special price reduction, called an allowance, may be given as an incentive to keep the merchandise.
7 - 15
PAST DUE
Uncollectible Accounts Receivable
Most businesses record an estimate of the bad debt expense by an adjusting entry at the end of the accounting period.
• • •
7-5
All disbursements, except petty cash, made by check.
Separate responsibilities for cash disbursement documents, check authorization, check signing, and record keeping.
7 - 14
130,000 130,000 78,000
78,000
70,000 70,000
42,000
42,000
Uncollectible Accounts Receivable
Bad debts result from credit customers who are unable to pay the amount they owe, regardless of continuing collection efforts. In conformity with the matching principle, bad debt expense should be recorded in the same accounting period in which the sales related to the uncollectible account were recorded.
Cash and Receivables
7
Cash and Receivables
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA