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Receivables

Receivables. What to do with Receivables?. Recognize Value Dispose. Recognize Receivables. Journal. Valuing Receivable. The concept of “Bad debt” Two Methods Direct Write off Allowance Method Estimate the Bad Debt Create “Allowance for Doubtful Accounts”. More on Allowance Method.

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Receivables

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  1. Receivables

  2. What to do with Receivables? • Recognize • Value • Dispose

  3. Recognize Receivables • Journal

  4. Valuing Receivable • The concept of “Bad debt” • Two Methods • Direct Write off • Allowance Method • Estimate the Bad Debt • Create “Allowance for Doubtful Accounts”

  5. More on Allowance Method • Balance Sheet • Actual Write off • If there is Recover of Write off

  6. Methods of Determining Allowance • Two Methods • Percentage of Sales • Percentage of Receivables • Percentage of Sales • A portion of total credit sales • New allowance is created and added to the old one

  7. Percentage of Receivables • Based on an aging schedule • Gives the final balance • Adjusted with existing balance

  8. Disposing of Receivables • Sale of Receivables • Sold to a “Factor” • Sale by Credit Card

  9. Notes Receivable • Like Accounts Receivable but with a “Promissory Note” • Has a specific term • Need to compute Interest

  10. Some Calculations

  11. Recognize, Value and Dispose

  12. What if dishonored? • Transfer to Accounts Receivable • If completely gone then write off to allowance

  13. Example

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