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Chapter 7 Cash And Receivables

Cash What is cash? Reporting cash. Summary of cash-related items.


What is Cash? Most li uid asset. Standard medium of e!change. "asis for measuring and accounting for all items. Current asset. #!amples$ coin% currency% available funds on deposit at the ban&% money orders% certified chec&s% cashier's chec&s% personal chec&s% ban& drafts and savings accounts. Reporting Cash$ (hree issues are related to cash re uire special attention$ ). Cash e uivalents. *. Restricted cash. +. "an& overdraft. Cash # uivalents$ Short-term% highly li uid investments that are both ). Readily convertible to cash% and *. So near their maturity that they present insignificant ris& of changes in interest rates. #!amples$ (reasury bills% Commercial paper% and Money mar&et funds. Restricted Cash$
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Companies segregate restricted cash from ,regularcash for reporting purposes. #!amples% restricted for$ ). .lant e!pansion% *. Retirement of long-term debt% and +. Compensating balances$ the minimum cash balance in chec&ing or saving accounts that the ban& re uires the customers to maintain. "an& /verdrafts$ /ccurs 0hen a company 0rites a chec& for more than the amount in its cash account. 1enerally reported as a current liability. /ffset against cash account only 0hen available cash is present in another account in the same ban& on 0hich the overdraft occurred. Summary of Cash-Related 2tems$

.etty Cash 3und$

4sed to pay small amounts. (he operation of the fund% often called an imprest system% involves$ ). #stablishing the petty cash fund. *. Ma&ing payments from the petty cash fund% and +. Replenishing the petty cash fund. Accounting entries are re uired 0hen$ ). the fund is established% *. the fund is replenished% and +. the amount of the fund is changed.

#!ample$ 5incolnville Company uses an imprest petty cash system. (he fund 0as established on March ) 0ith a balance

of 6)77. 8uring March the follo0ing petty cash receipts 0ere found in the petty cash bo!.

Receipt Date 3/5 7 9 11 1& No. 1 2 3 & 5 For Stamp inventory Freight out !i"ce##aneou" e$pen"e 'rave# e$pen"e !i"ce##aneou" e$pen"e Amount $ 39 21 % 2& 5

(he fund 0as replenished on March )9 0hen the fund contained 6+ in cash. /n March *7% the amount in the fund 0as increased to 6)97. 2nstructions$ :ournali;e the entries in March that pertain to the operation of the petty cash fund. Solution$ Account (itle and #!planation .etty Cash Cash (o establish the petty cash fund. Mar. )9 .ostage #!pense 3reight-/ut Miscellaneous #!pense (ravel #!pense Cash /ver and Short Cash (o replenish the petty cash fund. *7 .etty Cash Cash 8ate Mar. ) 8r. )77 +< *) )) *= * <7 97 97
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Cr. )77

(o increase the petty cash fund. >otice$ (otal e!penses ? remaining cash in the fund should e ual the original amount of the fund. ). Cash shortage occurs 0hen total e!penses ? remaining cash in the fund is less than the original amount of the fund. Cash shortage is debited to the Cash /ver and Short account 0hen replenishing the fund. *. Cash overage occurs 0hen total e!penses ? remaining cash in the fund is more than the original amount of the fund. Cash overage is credited to the Cash /ver and Short account 0hen replenishing the fund.

4se of a "an&$ (he use of a ban& minimi;es the amount of currency that must be &ept on hand and therefore contributes significantly to good internal control over cash. A chec& is a 0ritten order signed by the depositor directing the ban& to pay a specified sum of money to a designated recipient. (he three parties to a chec& are as follo0s$ a. (he ma&er @or dra0erA 0ho issues the chec&. b. (he ban& @or payerA on 0hich the chec& is dra0n. c. (he payee to 0hom the chec& is payable. A ban& statement sho0s$ a. chec&s paid and other debits charged against
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the account% b. deposits and other credits made to the account% and c. the account balance after each day's transactions. A ban& debit memoranda is usually included 0ith the ban& statement to indicate charges against the depositor's account such as a ban& service charge% cost of printing chec&s% and 0hen a previously deposited customer's chec& ,bounces- because of insufficient funds @>S3 chec&A. A ban& credit memoranda sho0s such items as the collection of a note receivable for the depositor by the ban&% or interest earned on deposits in the ban&.

Reconciling the "an& Account$ A reconciliation of a ban& account is necessary because the balance per ban& and balance per boo&s are seldom in agreement. (he lac& of agreement may be the result of time lags and errors. 2n reconciling the ban& statement% it is customary to reconcile the balance per boo&s @the cash balance in the ledgerA and the balance per ban& @the cash balance according to the ban& statementA to their adBusted @correctedA cash balances. (he reconciliation schedule consists of t0o sections. (he steps in preparing a ban& reconciliation are$ a. 8etermine deposits in transit. b. 8etermine outstanding chec&s.
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c. >ote any errors discovered. d. (race ban& memoranda to the records. #ach reconciling item used in determining the adBusted cash balance per boo&s should be recorded by the depositor @re uires a Bournal entry to correct the cash balance in the ledgerA. Reconciliation .rocedures$

? 8eposit in (ransit /utstanding Chec&s ?- "an& #rrors CCCCCCCCCCCCCCCCCCCCC C/RR#C( "A5A>C#

? ?-

>otes collected by ban& Service charges "oo& #rrors CCCCCCCCCCCCCCCCCCCC C/RR#C( "A5A>C#

#!ample$ (he follo0ing information pertains to 3amily Dideo Company. ). Cash balance per ban&% :uly +)% 67%*E+. *. Cash balance per boo&s% :uly +)% 67%*F=. +. :uly ban& service charge not recorded by the depositor 6*F. =. 8eposits in transit% :uly +)% 6)%977. 9. "an& collected 6<77 note for 3amily in :uly% plus interest 6+E% less fee 6*7.(he collection has not been recorded by 3amily% and no interest has been accrued. E. /utstanding chec&s% :uly +)% 69<). 2nstructions aA .repare a ban& reconciliation at :uly +).

bA :ournali;e the adBusting entries at :uly +) on the boo&s of 3amily Dideo Company. Solution$ aA 3amily Dideo "an& Reconciliation Statement 3or :uly% *7)7
Cash balance per ban& statement Add$ 8eposit in transit 5ess$ /utstanding chec&s AdBusted cash balance per ban& Cash balance per boo&s Add$ Collection of notes receivable Collection of interest 5ess$ "an& service charge >ote collection fee AdBusted cash balance per boo&s 67%*FF )%977 @9<)A 6F%)7* 67%*F= <77 +E @*FA @*7A 6F%)7*

bA >ote$ AdBusting Bournal entry includes only the adBustments to the cash balance per boo&s.

8ate Account (itle and #!planation :uly +) Cash >otes Receivable 2nterest Revenue (o record collection of note receivable plus interest by the ban&. :uly +) "an& Service #!pense Miscellaneous #!pense Cash (o record ban& Charges.

8r. <+E

Cr. <77 +E

*F *7 =F

When the above entries are posted to the cash account in the ledger$ 5edger "alance :uly +) "alance Cash 7%*F= :uly +) <+E F%)7* =F

>ote$ the cash balance in the ledger no0 agrees 0ith the adBusted cash balance per boo&s in the ban& reconciliation statement.

Receivables$

Receivables are defined as claims held against customers and others for money% goods% or services. Receivables may generally be classified as either trade or non-trade. (rade receivables$ are amounts o0ed by customers for goods sold or services rendered to them as part of normal business operations. (rade receivable are classified into$ ). Accounts Receivable$/ral promises of the purchaser to pay for goods and services sold.

*. >otes Receivable$ Written promises to pay a sum of money on a specified future date. >on-(rade Receivable$ arise from a variety of transactions such as$ ). 2nterest and dividends receivable% *. Advances to employees. Recognition of Accounts Receivables$ 2n most receivable transactions% the amount to be recogni;ed is the e!change price @amount due from the debtorA. (0o elements that must be considered in measuring receivables are$ @aA the availability of discounts @trade and cash discountsA% and @bA the length of time bet0een the sale and the payment due date @the interest factorA. (rade 8iscounts Reductions from the list price. >ot recogni;ed in the accounting records. Customers are billed net of discounts. Cash 8iscounts Companies offer cash discounts @sales discountsA to induce prompt payment @for e!ample% ,*G)7% nG+7-. (here are t0o methods for recogni;ing @recording accounts receivable$ ). (he gross method% and *. (he net method. #!ample @)A$ (ransaction$ ). Sales of 6)7%777% terms ,*G)7% nG+7-. *. Collection of amount due 0ithin discount period.

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1ross Method$ 8ate @)A Account (itle and #!planation Accounts Receivable Sales (o record sales on account terms *G)7% nG+7. Cash Sales 8iscount Accounts Receivable (o record collection of credit sales 0ithin the discount period. 8r. )7%777 Cr. )7%777 <%F77 *77 )7%777

@*A

>et Method$ Account (itle and #!planation 8r. Cr. Accounts Receivable <%F77 Sales <%F77 (o record sales on account terms *G)7% nG+7 at net. @*A Cash <%F77 Accounts Receivable <%F77 (o record collection of credit sales 0ithin the discount period. #!ample @*A$ 2f the amount due is collected after the discount period% the collection of cash is recorded as follo0s under the t0o methods$ 1ross Method$ 8ate Account (itle and #!planation Cash Accounts receivable (o record collection of credit sales after the discount period. 8r. )7%777 Cr. )7%777 8ate @)A

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>et Method$ 8ate Account (itle and #!planation Cash Accounts Receivable Sales 8iscount 3orfeited (o record collection of credit sales after the discount period. 8r. )7%777 Cr. <%F77 *77

(he sales discount forfeited is reported on the income statement 0ith other revenues @if the net method is usedA. >on-recognition of 2nterest #lement ideally% a company should measure receivables in terms of their present value. (hat is% the discounted value of the cash to be received in the future. (he profession specifically e!cludes from present value considerations ,receivables arising from transactions 0ith customers in the normal course of business 0hich are due in customary trade terms not e!ceeding appro!imately one year.-

Recognition of >otes Receivable$ 1enerally originate from$ Customers 0ho need to e!tend payment period of an outstanding receivable High-ris& or ne0 customers. 5oans to employees. Sales of property% plant% and e uipment. 5ending transactions @the maBority of notesA
2n terms of interest% notes receivable are classified to$

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). 2nterest-bearing notes$ 0hich have a stated rate of interest. *. >on-interest-bearing notes @or ;ero-interest bearing notesA$ include the interest as part of their face amount instead of stating it e!plicitly. >otes receivable are considered fairly li uid% even if long-term% because they may be easily converted to cash. Short-term notes are generally recorded at face value @less allo0ancesA because the interest implicit in the maturity value is immaterial. >otes maturing in + months or less are considered cash e uivalents and are not subBect to premium or discount amorti;ation. 5ong-term notes receivable should be recorded and reported at the present value of the cash e!pected to be collected. When the interest stated on an interest-bearing note is e ual to the effective @mar&etA rate of interest% the note sells at face value. When the interest stated on an interest-bearing note is less than the mar&et rate of interest% the note sells at a discount. When the interest stated on an interest-bearing note is grater than the mar&et rate of interest% the note sells at a premium.

(he discount% or premium is recorded% and then amorti;ed over the life of the note to appro!imate the effective interest rate.
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>ote 2ssued at 3ace Dalue$


#!ample$ "igelo0 Corp. lends Scandinavian 2mports 6)7%777 in e!change for a 6)7%777% three-year note bearing interest at )7I annually. (he mar&et rate of interest for a note of similar ris& is also )7I. Ho0 does "igelo0 record the receipt of the note? Solution$ .D of 2nterest @.resent value of ordinary annuityA$ .D-/An%i J A @.D3-/An%iA Where$ .D-/An%i J .resent value of an ordinary annuity of 6) invested for n periods at 2 interest rate. A$ the annuity @the annual interestA. .D3-/An%i J .resent value factor of an ordinary annuity of 6) invested for n periods at 2 interest rate @this factor is e!tracted from the present value of an ordinary annuity tableA. .D-/A +% )7I J 6)%777 ! 2nterest Received *.=FEF9 J 6*%=F7 3actor .resent Dalue

.D of .rincipal @.resent Dalue of the 3ace Dalue of >oteA .D J 3D @.D3n%iA Where$ .D$ .resent value. 3D$ 3uture value.
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.D3$ .resent value factor of a single amount of 6) invested for n periods at 2 interest rate. .D+% )7I J 6)7%777 .rincipal ! .79)+* 3actor J 67%9)+ .resent value

Summary .resent value of interest 6 *%=F7 .resent value of principal 7%9)+ >ote current mar&et value @.resent valueA 6)7%777 (he receipt of the note receivable is recorded by "igelo0 as follo0s$ 8ate Account (itle and #!planation :an. Kr ) >otes Receivable Cash (o record the receipt of a note receivable for a loan to Scandinavian 2mports. 8r. )7%777 Cr. )7%777

#ach year% "igelo0 0ould record interest revenue on the note receivable as follo0s$

8ate Account (itle and #!planation 8ec. Kr ) Cash 2nterest Revenue (o record interest revenue on the note receivable.

8r. )%777

Cr. )%777

>ote >ot 2ssued at 3ace Dalue$


Lero-2nterest-"earing >ote @>on-interest-"earing >oteA$

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>otes receivable are sometimes issued 0ith ;ero interest rate stated or at a stated rate that is unreasonable. 2n such instances the present value of the note is measured by the cash proceeds to the borro0er or fair value of the property% goods% or services rendered. (he difference bet0een the face amount of the note and the cash proceeds or fair value of the property represents the total amount of interest during the life of the note. #!ample$ :eremiah Company receives a three-year% 6)7%777 ;erointerest-bearing note. (he mar&et rate of interest for a note of similar ris& is <I. Ho0 does :eremiah record the receipt of the note? Solution$ .D of .rincipal @.resent value of the 3ace Dalue of the >oteA .D+% <I J 6)7%777 ! .77*)F .rincipal 3actor J 67%7*).F7 .resent value

Since the present value of the note receivable 67%7*).F7 is less than its face value% the note receivable is issued at a discount. (he discount on the note J 3ace value of note M .resent value of the note J 6)7%777 M 7%7*).F7 J6*%*7F.*7 (he amount of the discount on the note receivable @6*%*7F.*7A represents the interest revenue that :eremiah Company 0ill receive from the note over the three years.
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:eremiah Company records the receipt of the note receivable as follo0s$ 8ate Account (itle and #!planation 8r. Cr. :an. >otes Receivable )7%777 Kr ) Cash 7%7*).F7 8iscount on >otes Receivable *%*7F.*7 (o record the receipt of a ;erointerest note receivable. :eremiah Company records interest revenue on the note at the end of each of the three years as follo0s$ 8ate Account (itle and #!planation 8ec. Kr ) 8iscount on >otes Receivable 2nterest Revenue (o record interest revenue on the note receivable. 8ec. Kr * 8iscount on >otes Receivable 2nterest Revenue 8r. E<=.<E Cr. E<=.<E 797.9) 797.9)
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8ec. Kr + 8iscount on >otes Receivable 2nterest Revenue

F*9.7+ F*9.7+

(he discount on notes receivable account over the three years appears as follo0s$ 8iscount on >otes Receivable
#nd Kr ) #nd Kr * #nd Kr + 6E<=.<E "eg Kr ) 797.9) "al end Kr ) F*9.7+ "al end Kr * "al end Kr + 6*%*7F.*7 )%9F+.*= F*9.7+ -7-

(he 8iscount on notes receivable is a contra asset account that is deducted from notes receivable on the balance sheet as sho0n belo0$
"eg Kr ) )7777 **7F.*7 77*).F7 #nd Kr ) )7777 )9F+.*= F=)E.7E #nd Kr * )7777 F*9.7+ <)7=.*7 #nd Kr + )7777 -7)7777

>otes Receivable 5ess$ 8isc on >GR Carrying value

2nterest-"earing >ote$
#!ample$ Morgan Corp. ma&es a loan to Marie Co. and receives in e!change a three-year% 6)7%777 note bearing interest at )7I annually. (he mar&et rate of interest for a note of similar ris& is )*I. Re uired$ ). Compute the present value of the note receivable. *. Compute the discount on notes receivable. +. .repare a Bournal entry to record the receipt of the note receivable. =. .repare a schedule of note discount amorti;ation using the effective interest method. 9. .repare Bournal entries to record the amorti;ation of the discount on notes receivable.

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Solution$ .D of 2nterest @.resent value of ordinary annuityA$ .D-/A+% )*I J 6)%777 ! 2nterest Received *.=7)F+ 3actor J 6*%=7* .resent value

.D of .rincipal @.resent value of the 3ace Dalue of the >oteA .D+% )*I J 6)7%777 .rincipal ! .7))7F 3actor J 67%))F .resent value

.resent Dalue of the >ote J .resent value of interest ? present value of .rincipal J 6*%=7* ? 67%))F J 6<%9*7

Since the present value of the note receivable 6<%9*7 is less than its face value 6)7%777% the note receivable is issued at a discount. (he discount on the note J 3ace value of note M .resent value of the note J 6)7%777 M 6<%9*7 J6=F7

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(he receipt of the note is recorded as sho0n belo0$ 8ate Account (itle and #!planation :an. >otes Receivable Kr ) Cash 8iscount on >otes Receivable (o record the receipt of a +-year% )7I note receivable. 8r. )7%777 Cr. <%9*7 =F7

(he schedule of note discount amorti;ation using the effective interest method is sho0n belo0$

(he amorti;ation of the discount on notes receivable is recorded over the three years as sho0n belo0$ 8ate Account (itle and #!planation #nd Cash Kr ) 8iscount on >otes receivable 8r. )%777 )=* Cr.

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#nd Kr *

#nd Kr +

2nterest revenue (o record interest revenue and amorti;ation of discount on notes receivable. Cash )%777 8iscount on >otes receivable )9< 2nterest revenue (o record interest revenue and amorti;ation of discount on notes receivable. Cash )%777 8iscount on >otes receivable )7< 2nterest revenue 8iscount on >otes Receivable
#nd Kr ) #nd Kr * #nd Kr + 6)=* "eg Kr ) )9< "al end Kr ) )7< "al end Kr * "al end Kr +

)%)=*

)%)9<

)%)7<
6=F7 ++F )7< -7-

(he 8iscount on notes receivable is a contra asset account that is deducted from notes receivable on the balance sheet as sho0n belo0$
"eg Kr ) )7777 =F7 <%9*7 #nd Kr ) )7777 ++F <%EE* #nd Kr * )7777 )7< <%F*) #nd Kr + )7777 -7)7777

>otes Receivable 5ess$ 8isc on >GR Carrying value

Daluation of >otes Receivable

Short-(erm reported at >et Reali;able Dalue @same as accounting for accounts receivableA. 5ong-(erm - 3AS" re uires companies disclose not only their cost but also their fair value in the notes to the financial statements.

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3air Dalue /ption. Companies have the option to use fair value as the basis of measurement in the financial statements. #!ample$ @recording fair value optionA$ Assume that #scobar Company has notes receivable that have a fair value of 6F)7%777 and a carrying amount of 6E*7%777. #scobar decides on 8ecember +)% *7)7% to use the fair value option for these receivables. (his is the first valuation of these recently ac uired receivables. At 8ecember +)% *7)7% #scobar ma&es an adBusting entry to record the increase in value of >otes Receivable and to record the unreali;ed holding gain% as follo0s. 8ate Account (itle and #!planation 8r. Cr. >otes Receivable )<7%777 4nreali;ed Holding 1ain or 5oss )<7%777

8isposition of Accounts and >otes Receivable

>ormally% accounts and notes receivable are collected 0hen due and removed from the boo&s. "ut in order to accelerate the receipt of cash from receivable o0ner may transfer accounts or notes receivable to another company for cash. (ransfer accomplished by$ ). Secured borro0ing. *. Sale of receivables.

Secured "orro0ing$

(he o0ner of the accounts receivable borro0s cash by 0riting a promissory note designating the accounts receivable as collateral. ). (he borro0er and lender agree as to the specific accounts that serve as security. (he borro0er
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typically ma&es collections on the assigned accounts and remits the collections plus a finance charge @interestA to the lender. *. (he borro0er also recogni;es all discounts% returns and allo0ances% and bad debts. #!ample$ March )% *7)7% Ho0at Mills% 2nc. provides @assignsA 6777%777 of its accounts receivable to Citi;ens "an& as collateral for a 6977%777 note. Ho0at Mills continues to collect the accounts receivableN the account debtors are not notified of the arrangement. Citi;ens "an& assesses a finance charge of )I of the accounts receivable and interest on the note of )*I. Ho0at Mills ma&es monthly payments to the ban& for all cash it collects on the receivables. (he follo0ing are the transactions related to this event$ ). /n March )% the transfer of accounts receivable and issuance of a note for the loan. *. Collection in March of 6==7%777 of accounts receivable less cash discount of 6E%777. 2n addition% sales returns of 6)=%777 0ere received. +. /n April )% Ho0at Mills remitted March collections plus accrued interest to the ban&. =. Collections in April of the balance of accounts receivable less 6*%777 0ritten off as uncollectible. 9. /n May )% Ho0at Mills remitted the balance due on the note plus interest to the ban&. 2nstructions$ :ournali;e the above transactions on the records of Ho0at Mills. Solution$ March )$ 3inance Charge J 6777%777 O )I J 67%777 Cash received J 6977%777 loan - 67%777 3inance chare
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J 6=<+%777 8ate Account (itle and #!planation Mar. ) Cash 3inance Charge >otes .ayable (o record transfer of accounts receivable and issuance of a note payable to the ban&. 8r. =<+%77 7 7%777 Cr. 977%777

8uring March$ Cash collected J 6==7%777 - 6E%777 J 6=+=%777 Accounts receivable J 6==7%777 ? 6)=%777 Sales returns J 6=9=%777 8ate Account (itle and #!planation 8r. Cr. March Cash =+=%77 Sales 8iscount 7 Sales Returns E%777 Accounts Receivable )=%777 =9=%777 (o record collection of accounts receivable less sales discount and sales returns. April )$ 2nterest e!pense on the note payable for one month J 6977%777 O )*I O )G)* J 69%777 Cash paid to the ban& J 6=+=%777 cash collected from receivable ? 69%777 interest on the note payable J 6=+<%777 8ate Account (itle and #!planation April ) >ote .ayable 2nterest #!pense Cash (o record remittance of cash collections plus interest on the note 8r. =+=%77 7 9%777 Cr. =+<%777

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payable to the ban&. 8uring April$ "alance of accounts receivableJ 6777%777 - 6=9=%777 credits during March 6*=E%777 Cash Collected from receivable J 6*=E%777 - 6*%777 Written off J 6*==%777 8ate Account (itle and #!planation 8r. Cr. April ) Cash *==%77 Allo0ance for 8oubtful Accounts 7 Accounts Receivable *%777 *=E%777 (o record collections of accounts receivable less accounts 0ritten off. May )$ 4npaid balance of the note payable J 6977%777 - 6=+=%777 J 6EE%777 2nterest e!pense on the unpaid balance on the note payable for one month J 6EE%777 O )*I O )G)* J 6EE7 Cash paid to the ban& J 6EE%777 unpaid balance of the note payable ? 6EE7 interest J 6EE%EE7 8ate Account (itle and #!planation April ) >ote .ayable 2nterest #!pense Cash (o record .ayment of the balance of the note payable plus interest to the ban&. 8r. EE%777 EE7 Cr. EE%EE7

Sales of Receivables$
When accounts and notes receivable are factored @soldA% the factoring arrangement can be 0ith recourse or 0ithout recourse.

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2f receivables are factored on a 0ith recourse basis% the seller guarantees payment to the factor in the event the debtor does not ma&e payment. When a factor buys receivables 0ithout recourse% the factor assumes the ris& of collectibility and absorbs any credit losses. We 0ill only focus on the case of sale of receivable on a 0ithout recourse basis.

Sale of Receivable Without Recourse$ .urchaser assumes ris& of collection. (ransfer is outright sale of receivables. Seller records loss on sale. Seller use 8ue from 3actor @receivableA account to cover discounts% returns% and allo0ances. #!ample$ Crest (e!tiles% 2nc. factors 6977%777 of accounts receivable 0ith Commercial 3actors% 2nc.% on a 0ithout recourse basis. (he receivable records are transferred to Commercial 3actors% 2nc.% 0hich 0ill receive the collections. Commercial 3actors assesses a finance charge of +I of the amount of accounts receivable and retains an amount e ual to 9I of the accounts receivable @for probable adBustmentsA. 2nstructions$ .repare the Bournal entry on the records of Crest (e!tiles% 2nc.% to record the sale of receivable. Solution$

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5oss on sale of receivable @the finance chargeA J 6977%777 O +I J 6)9%777 8ue 3rom 3actor J 6977%777 O 9I J 6*9%777 Cash collected from sale of receivable J 6977%777 M @6)9%777 ? 6*9%777A J 6=E7%777 (he :ournal entry on the records of Crest (e!tiles% 2nc.% to record the sale of receivable is sho0n belo0$ 8ate Account (itle and #!planation 8r. Cr. Cash =E7%77 8ue 3rom 3actor 7 5oss on Sale of Receivable *9%777 Accounts Receivable )9%777 977%777

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