ACCOUNTS RECEIVABLE AND NOTES RECEIVABLE

ACCOUNTS RECEIVABLE
 Subsequently measured at NRV
o Gross AR less allowances
 Types of allowance
o Allowance for sales discount
 Sales discount xx

Allowance for sales discount xx

o Allowance for sales return

 Sales return xx

Allowance for sales return xx

o Allowance for freight charges

 FOB destination and Freight Collect

Freight charge xx

Allowance for freight charges xx

 Allowance for doubtful accounts

o When doubtful: Doubtful accounts expense xx

Allowance for doubtful accounts xx

o Written off: Allowance for doubtful accounts xx

Accounts receivable xx

o Recovery: Accounts receivable xx

Allowance for doubtful accounts xx

Cash xx

Accounts receivable xx

 Methods of estimating doubtful accounts

o Percent of sales – DAE
o Percent of AR – ADA
o Aging of AR – ADA

VALUATION OF NOTES RECEIVABLE (ASSUMING NO IMPAIRMENT)

 Short-term receivable (whether interest bearing or non-interest bearing)
o Theoretically should be measured at cash price or PV and of amortized cost
o By convention, may be measured at face amount because the discount computed is immaterial
 Long-term notes receivable
o Interest bearing (effective rate is also the nominal interest
 Measured at face amount because normally face amount is also the cash price or PV
 Face amount usually represents the amortized cost
o Non-interest bearing
 Measured at cash price or PV
 Amortized cost using the effective interest method