ACCT 200 Lecture 10 Outline of Last Lecture II. Inventory Costing pt. 2III. Analysis of InventoryOutline of Current Lecture IV. Types of ReceivablesV. Accounts ReceivableVI. Notes Receivable Current LectureChapter 8- Reporting and Analyzing ReceivablesTypes of ReceivablesAmounts due from individuals and companies that are expected to be collected in cash- A/R- amounts customers owe on account that result from the sale of goods and serviceso Short term- N/R- written promise (formal instrument) for amount to be received. Also called trade receivableso Short term or long term- Other receivables- nontrade receivables such as interest, loans to officers, advances to employees, and income taxes refundableo Short term or long termo Not from operationsAccounts ReceivableTwo accounting issues:1. Recognizing accounts receivable2. Valuing accounts receivableRecognizing accounts receivable- Service organization- records a receivable when it performs service on account- Merchandiser- records accounts receivable at the point of sale of merchandise on accountValuing Accounts ReceivableThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- AFDA- allowance for doubtful accounts- BDE- bad debt expenseUncollectible accounts receivable- Sales on account raise to the possibility of accounts not being collected- Seller records losses that result from extending credit as bad debt expenseMethods of accounting for uncollectible accounts- Allowance Methodo Losses are estimated Matches revenue and expenseo A/R valued at NCRVo Is GAAP- Direct write ofo DON’T USEo NOT ALLOWED (NO GAAP)2 Methods for estimating the allowance1. Aging of A/R- how old is the outstanding A/R = how many days since the due date2. Percent of A/R- calc 1,000,000 A/R x percentAging the accounts receivable- customer balances are classified by the length of time they have been unpaidNotes ReceivableA promissory note is a written promise to pay a specified amount of money on demand or at a definite time. May be used:- When individuals and companies lend or borrow money- When amount of transaction and credit period exceed normal limits (terms)- In settlement of accounts receivableTo the payee, the promissory note is a N/RTo the maker, the promissory note is a N/PDetermining the maturity date- Note expressed in terms of o Monthso DaysComputing interest- When counting days, omit the date the note is issued, but include the due dateValuing notes receivable- Report short-term notes receivable at cash >>> net realizable value- N/R allowance account is AFDADisposing of notes receivable- Held to maturity is settled- Default- Sell the note: speed up cash collectionHonor of notes receivable- A note is honored when its maker pays it in full at its maturity dateDishonor of notes receivable- A dishonored note is not paid in full at maturity. Dishonored note receivable is no longer