Accounts Receivable

1. Account receivable is an open account not supported by a promissory note. Also

known as trade debtors
2. advances to affiliates are usually treated as a long-term investment
3. Creditors’ accounts with debit balances are classified as current assets.
4. Special deposits on contract bids normally are classified as other noncurrent
assets
5. Financial assets shall be recognized initially at fair value plus transaction costs
that are directly attributable to the acquisition. Fair value is usually the
transaction price , fair value of the consideration given
6. AR is subsequently measured at net realizable value or estimated recoverable
amount
7. assets shall not be carried at above their recoverable amount
8. freight collect means freight charge on the goods shipped is not yet paid. Buyer
pays for it
9. freight prepaid is already paid by the seller
10. AR 100,000
Freight-out 5,000
Sales 100,000
Allow.for freight charge 5,000

Cash 93,000
Sales discount 2,000
Allowance for freight charge 5,000
Accounts receivable 100,000

11. Sales return

Allowance for sales return

12. Net method(beyond the discount period):

Cash 100,000
AR 95,000
 Sales discount forfeited(income) 5,000

13. Allowance method conforms with matching principle. AR is properly measured

at NRV
14. Reversal in Direct write-off:
AR Cash or if discovered in subsequent year: Cash
Bad debts AR Miscellaneous Income

15. Correction of excessive allowance:

Allowance for DA 30T
Doubtful accounts 20T
Miscellaneous income 10T

16. if granting of credit and collection of accounts are under the charge of the sales
manager, doubtful accounts shall be considered as distribution cost. If under
an officer, it is administrative expense. In the absence to the contrary it is admin
expense.