Marketable Securities & Account Receivables

2. Marketable Securities
II. Marketable Securities:

Any equity or debt instrument that it readily salable and can be converted into
cash, or exchanged with ease. Stocks, bonds, short-term commercial paper and
certificates of deposit are all considered marketable securities because there is
a public demand for them and because they can be readily converted into
cash.

Accounting For Marketable Securities:

There are four different accounting journal entries related to M/S.

1. Purchase of the short term investment:

Marketable Securities (ABC capital stock) ------------- 20,000

Cash -------------------------------------------------------------20,000

2. Recognition of Investment Revenue(Dividend):

Cash ------------------------- 100

Dividend (Interest Earned in case of debt Inst) ------ 100

2. Marketable Securities
Contt
3.Sale
of Short Term Investment:

i. Sale at a gain.
Cash ------------------------22,000
M/S (ABC capital stock) -------- 20000
Gain of sale of Investment------- 2000
ii. Sale at loss.
Cash ------------------------------- 19000
Loss on sale of investment ---- 1000
M/S (ABC capital stock) --------- 20,000

4. Adjusting Marketable Security to Market Value.

i. In Case of Gain: (Unrealized)
Marketable Securities ------------------- 4000
Unrealized Holding Gain ------------------ 4000

ii. In Case of Loss: (Unrealized)

Unrealized Holding Loss--------------- 4000
Marketable Securities ------------------- 4000

3. Account Receivable
III. Account Receivable:

Money which you own as you have done credit sales to your
customer.

What is uncollectible or bad debts and allowance for doubtful

account?

Most companies make sales on credit as it generally allows

them to increase their sales. Companies that do make credit
sales will estimate the amount of sales they expect to lose to
bad debt (Which cant be collected) which is found in the
allowance for doubtful accounts.

3. Account Receivable
Contt
Accounting Related to Account Receivable:

i. Journal Entry to record uncollectible account:

Uncollectible account expense -------------- 2000
Allowance for doubtful account ---------------- 2000

ii. Journal Entry to write off an uncollectible account:

Allowance for doubtful account ---------- 2000
A/R (Shahid Books) -------------------------- 2000

iii. Journal Entry on recovery of uncollectible account:

A/R (Shahid Books) ----------------------- 1000
Allowance for doubtful account ---------- 1000

THANKS