1 / 9

HFT 2401

HFT 2401. Chapter 9 Receivables and Payables. Receivables. Accounts Receivable Very Liquid Current Assets – Turn to cash in 30 to 60 days Trade Receivables – From the “ordinary” course of business – usually unsecured Guest Ledger City Ledger Creditor – the holder of the receivable

dianne
Download Presentation

HFT 2401

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. HFT 2401 Chapter 9 Receivables and Payables

  2. Receivables • Accounts Receivable • Very Liquid Current Assets – Turn to cash in 30 to 60 days • Trade Receivables – From the “ordinary” course of business – usually unsecured • Guest Ledger • City Ledger • Creditor – the holder of the receivable • Debtor – the one who owes the money

  3. Collection • The sale is not “complete” until the cash is in the bank • Uncollectible accounts – bad debt losses • Credit checking procedures • Collections • Courtesy letters • Phone calls • Collection agency / attorney

  4. Uncollectible Accounts • Direct Write Off Method • Write off at the time it is deemed uncollectible • Allowance Method • Accrues a percentage based on history • Preferred as it is more applicable to the matching principle • Carrying value – net on the books • Percentage of sales method – credit versus cash sales

  5. Receivables Aging • Usually done in 30 day increments • Used on a historical basis to determine allowance entry • Also used for cash forecasting purposes • Used by credit managers to determine continued credit worthiness of account

  6. Notes Receivable • Written promises to receive cash in the future • Usually interest bearing • Can be secured by an asset • Maker – the one promising to pay • Payee – the one who is owed • Interest = Principal x Rate x Time

  7. Notes Receivable • Accounts receivable can be converted • Dishonored notes – written off the books • Discounting – Sell the value of the note to a third party for collection • Also called factoring • Increase cash flow • Discount = Maturity Value x Discount x Discount Period

  8. Payables • Accounts Payable – Unsecured debt resulting from the ordinary course of business • Invoices • Usually due in 30 days or less • Cash discounts can be offered • Notes Payable – Secured debt • Non-interest bearing • Interest bearing • Interest = Principal x rate x time

  9. Homework • Problem 7 • Problem 8 • Problem 13

More Related