Accounts Receivables and Sales

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Accounts Receivables and Sales

Lecture number:
Lecture Note
Miami University, Oxford
Acc 221 - Intro to Financial Accounting
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Lecture 17 Outline of Previous Lecture  Section 16: Allowance and Notes Receivable  Cash Allowance o Write-off entries o Adjusting Entries o System o Reinstating an account  Adjusting Entries o Accounts Receivable o Adjusting Allowance Account  Note Receivable o Legally Binding Contracts Outline of Current Lecture  Section 16: Account Receivables and Sales  Calculating net revenue o Discounts, returns, and allowance  Uncollectable Accounts o Allowance v. direct write-off method  Company impact o Collection period and turnover  Estimating uncollectable accounts o Percentage-of-credit sales Current Lecture  Section 17: Account Receivables and Sales  Calculating net revenue o To calculate net revenue, you must take into consideration the discounts, returns, and allowance  Sales, returns, and allowances are all contra revenue accounts, and are subtracted from the total revenue to get the net revenue  Uncollectable accounts o Allowance v. direct write off methods  Direct write off allows us to directly decrease the accounts receivable account once we know that an individual cannot pay the balance owed.  If the purchase on credit and the realization that the account is now uncollectable occur within the same period, this upsets the matching principle within accounting, and creates problems for the bad debt expense accounts ACC 221 1st Edition

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