DOC PREVIEW
MU ACC 221 - Cash Reconciliation and Accounts Receivable
Type Lecture Note
Pages 3

This preview shows page 1 out of 3 pages.

Save
View full document
View full document
Premium Document
Do you want full access? Go Premium and unlock all 3 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 3 pages.
Access to all documents
Download any document
Ad free experience

Unformatted text preview:

ACC 221 1st Edition Lecture 15 Outline of Previous Lecture- Section 14: Review Cash Account Cash Accountso Uses  Bank Balance is Wrongo Deposits Outstandingo Check Outstanding Company Balance is Wrongo Service Chargeso Collection of a NoteOutline of Current Lecture - Section 15: Cash Reconciliation and Accounts Receivable  Cash Reconciliation Wrap Upo Non-Sufficient Funds (NSF) Checkso Company Error in Accounting System Accounts Receivable o Not Getting Paido Direct Write-off Method o Allowance Method Current Lecture- Section 15: Cash Reconciliation and Accounts Receivable Cash Reconciliation Wrap upo Non-Sufficient Funds (NSF) Checks Occurs when a customer bounces a check written to the company.  When this occurs, we write down the check in the company accounting systemand go to deposit the check. Once at the bank, the bank will record the entry being debited into your cash account and then immediately credited out, leaving a net 0 impact on the cash account.- This is because the bank cannot leave the money in your account, as the individual has not paid you.  We must reconcile our account to match the bank, so we take the money fromthe bounced check out of our cash account.- Dr. Accounts Receivable, Cr. Cash These 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.- We do not take the funds out of sales revenue because we have already completed the work, and still intend to get paid for that work.o Company error in accounting system When doing this, maintain the mindset of the bank reconciliation affecting thecash account The company has made an error into the accounting system and must fix the issue. These errors may include:- Lowering cash too much- Lowering Cash too little- Depositing too much- Depositing too littleo Generally occurs by either miscalculation or making a mistake in transcribing the amount (mixing up the numbers)- Original entry (lower cash too much):o Dr. Rent Expense, Cr. Cash- Correcting Entry:o Dr. Cash, Cr. Rent Expense Accounts Receivableo Not getting paid Accounts receivable – buying on account and paying later. This is considered an asset only if it is very likely that we will be receiving our payment- What happens when we are no longer going to receive money? o Must remove from assets Tracking who gives us money- Even if more than one person owes us money, only ever have one accounts receivable account- Sub ledger - account to keep track of individual customers, dates of transactions, and the amounts that they owe; acts as a support system for accounts receivableo Direct Write-off method When someone buys on account, it is assuming that they are credit worthy and will pay off the amount owed. - Dr. Accounts Receivable, Cr. Service revenue- In this particular case, if a customer is supposed to pay within 20 days and doesn’t pay, we may call, send notices, and even threaten to send a collections officer (may lose about 30% of amount owed, but still better than $0)o If the person requires more time, may be able to convert the accountsreceivable into a note, so the company can collect interest and be guaranteed a return. - File bankruptcy, must take money owed out of accounts receivable because we no longer expect to collect the money or consider it an asset- Must remove customer, amount, and entries from sub ledger Direct write-off method is not a generally accepted accounting principle- Violates the matching principle, expenses and revenue will not match, as this would cause them to potentially be written in different accounting cycleso Allowance method Combine estimates with actual numbers- Evaluate how old an accounts receivable is, and determine how much money you don’t believe we will be able to collect- Bad debt – may determine how well the company’s collection methods areworking, and may cause credit availability to tighten for customers if there is too much bad debto 2 loans are getting old (few months), totaling $12,000. Estimate that about $6,000 will not pay, but do not know who or for sure that they will noto End of the year, record this estimate Dr. bad debt expense, Cr. Allowance of uncollectable accounts Allowance of uncollectable accounts is a contra account in the assets section, working against accounts receivable- Generally accepted accounting principle, because allowance method allows expense to be in same cycle as revenue, and has little impact on thesystem and balance sheetso Accounts receivable – allowance of uncollectable accounts = net realizable value o Acts as two separate lines on journal Writing off entry as allowance- Now know who and how much is not being paid- Dr. Allowance of uncollectable accounts, Cr. Accounts Receivable- Lower both accounts receivable and


View Full Document

MU ACC 221 - Cash Reconciliation and Accounts Receivable

Documents in this Course
Load more
Download Cash Reconciliation and Accounts Receivable
Our administrator received your request to download this document. We will send you the file to your email shortly.
Loading Unlocking...
Login

Join to view Cash Reconciliation and Accounts Receivable and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Cash Reconciliation and Accounts Receivable 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?