(精品)财务会计financialaccounting英文版.ppt

TOPIC3Part IIACCOUNTS/NOTES RECEIVABLE1 1Learning Objectives1.Define receivables and identify the different types of receivables.2.Explain accounting issues related to recognition and valuation of accounts receivable.3.Assignment and Factoring of Accounts Receivables2 2Learning Objectives4.Explain accounting issues related to recognition and valuation of notes receivable.5.Explain how receivables are reported and analysed.3 3Section 1:Definition and types of receivables4 4Receivable-DefinitionAmountsduefromindividualsandcompanies.5 5Accounts receivables ReceivableassociatedwiththenormaloperatingReceivableassociatedwiththenormaloperatingactivitiesofabusinessactivitiesofabusinesse.g.Creditsalesofgoods&servicestocustomerse.g.Creditsalesofgoods&servicestocustomers Expectedtobecollectedgenerallywithin30to90Expectedtobecollectedgenerallywithin30to90days.days.Mostsignificanttypeofclaimheldbycompany.Mostsignificanttypeofclaimheldbycompany.OftencalledOftencalledtrade receivablestrade receivables.6 6Notes receivables ReceivablesthatareevidencedbyaformalwrittenReceivablesthatareevidencedbyaformalwrittenpromisetopayacertainsumofmoneyataspecifiedpromisetopayacertainsumofmoneyataspecifieddatedate NormallyrequirespaymentofinterestandextendsforNormallyrequirespaymentofinterestandextendsfortimeperiodsof60-90daysorlongertimeperiodsof60-90daysorlonger NotesreceivablesgiveholderastrongerlegalclaimtoNotesreceivablesgiveholderastrongerlegalclaimtoassetsthanaccountsreceivableassetsthanaccountsreceivable PromissorynoteisanegotiableinstrumentandmaybePromissorynoteisanegotiableinstrumentandmaybetransferredtoanotherpartybyendorsementtransferredtoanotherpartybyendorsement7 7Other receivablesNon-tradereceivableIncludeallothertypesofreceivableArisefromavarietyoftransactionse.g.Saleofproperty,advancestodirectors&employees,claimforlossesordamages.8 8Section 2:Accounting issues-recognition&valuation of accounts receivables9 9Accounts Receivable IssuesRecognitionandvaluationofaccountsreceivableTradediscountsTradediscounts-Cashdiscounts-CashdiscountsSalesreturnsandallowancesSalesreturnsandallowancesValuationoftradedebtorsValuationoftradedebtors1010Accounts Receivable:RECOGNITIONRecognizingaccountsreceivablesCompaniesrecordaccountsreceivableatCompaniesrecordaccountsreceivableatpointofsalepointofsaleEntryisrecordedtoincreasebothEntryisrecordedtoincreasebothAccounts Accounts ReceivableReceivableandandSalesSalesasfollows:asfollows:Journalentry:Journalentry:DRDR Accounts Receivable Accounts ReceivableRMXXXRMXXXCRCRSalesSalesRMXXXRMXXX(to record sales of RMXXX)(to record sales of RMXXX)1111RECORDING DISCOUNTSTherearetwomethods:(1)Grossmethodrecordsdiscountswhentakenbycustomers.(2)Netmethodrecordsdiscountsnottakenbycustomers.1212 RecordrevenueatRecordrevenueatgrossgrossamountofsalesamountofsales WhencustomertakesWhencustomertakesthediscount,recordthediscount,recordcashdiscountscashdiscounts CashdiscountsreduceCashdiscountsreducegrosssalesrevenuegrosssalesrevenue RecordrevenueatgrossRecordrevenueatgrossamountofsalesamountofsalesless less cash discountcash discount WhencustomerforfeitsWhencustomerforfeitsdiscount,recorddiscount,recorddiscounts not takendiscounts not taken ReportdiscountsReportdiscountsforfeitedasotherforfeitedasotherrevenuerevenueGross MethodNet MethodRECORDING DISCOUNTS1313Accounts Receivable:RECOGNITIONSalesdiscount(Grossmethod)Cash(sales)discountsCash(sales)discounts areinducementstoareinducementstocustomersforpromptpaymentofamountscustomersforpromptpaymentofamountsbilled.billed.CashdiscountsarenormallyrecordedandCashdiscountsarenormallyrecordedandappearinbooksasaappearinbooksasareductionreductionofof salessalesrevenuerevenue(grossmethod).(grossmethod).1414Accounts Receivable:RecognitionExample:ifthesalesinvoiceofRM100Example:ifthesalesinvoiceofRM100includethecreditterms“2/10,net60days”includethecreditterms“2/10,net60days”-2%cashdiscountongrossinvoiced-2%cashdiscountongrossinvoicedamountisgivenifpayswithin10days.amountisgivenifpayswithin10days.UsingtheGrossmethodthetransactionUsingtheGrossmethodthetransactionwouldberecordedasfollows:wouldberecordedasfollows:Atdateofsale:Atdateofsale:DrAccountsReceivable100DrAccountsReceivable100CrSalesCrSales1001001515Accounts Receivable:RecognitionAtthedateofreceipt(assumediscountistaken):Atthedateofreceipt(assumediscountistaken):DrCashDrCash9898DrCashdiscountonsalesDrCashdiscountonsales22CrAccountsReceivableCrAccountsReceivable100100Atthedateofreceipt(assumepaymentisAtthedateofreceipt(assumepaymentisreceivedafterdiscountperiod):receivedafterdiscountperiod):DrCashDrCash100100CrAccountsReceivable1001616NetMethod:NetMethod:Atpointofsale:Atpointofsale:Dr.AccountsReceivableDr.AccountsReceivable9898Cr.SalesCr.Sales9898Ifpayswithindiscountperiod:Ifpayswithindiscountperiod:Dr.CashDr.Cash9898Cr.AccountsReceivableCr.AccountsReceivable9898Ifpaysafterdiscountperiod:Ifpaysafterdiscountperiod:Dr.CashDr.Cash100100Cr.AccountsReceivableCr.AccountsReceivable9898DiscountforfeitedDiscountforfeited221717Accounts Receivable:RECOGNITIONTradediscountsTrade(quantity)Trade(quantity)discountsarediscountsarenotnot recordedrecorded.InvoicedattheamountnetofthetradeInvoicedattheamountnetofthetradediscount(netmethod).discount(netmethod).e.g.:ThequotedpriceofRM100andatradee.g.:ThequotedpriceofRM100andatradediscountof10%resultedinsalesanddiscountof10%resultedinsalesanddebtoramountrecordedatRM90.debtoramountrecordedatRM90.1818Accounts Receivable:RECOGNITIONSalesreturn&allowancesAllowancesaretobemadeforAllowancesaretobemadeforGoodsthatarereturnedbycustomers,and/orGoodsthatarereturnedbycustomers,and/orGoodsthataredamagedduringshipment,Goodsthataredamagedduringshipment,spoiledordefectivegoods,orshipmentofanspoiledordefectivegoods,orshipmentofanincorrectquantityortypeofgoods.incorrectquantityortypeofgoods.NetsalesandaccountsreceivableareNetsalesandaccountsreceivablearereduced.reduced.1919Accounts Receivable:RecognitionExample:AssumethatbooksAcostingRM700aresoldandshippedtocustomerBforRM1,200.BuyercallstoinformthatBookCwereactuallyordered.Buyeragreestoacceptthegoodsifareductioninpriceisgiven.ThecompanyallowsanallowanceofRM250.2020Accounts Receivable:RecognitionTheentrytorecordthesalesallowance:Theentrytorecordthesalesallowance:DrSalesreturnsandallowanceDrSalesreturnsandallowance250250CrAccountsreceivableCrAccountsreceivable250250Ifbuyerreturnsthegood,theentrywillbe:Ifbuyerreturnsthegood,theentrywillbe:DrSalesreturnsandallowanceDrSalesreturnsandallowance1,2001,200CrAccountsreceivableCrAccountsreceivable1,2001,200DrInventoryDrInventory700700CrCostofgoodssoldCrCostofgoodssold7007002121VALUATION OF ACCOUNTS RECEIVABLEAccordingtoFRS139,loanandreceivableAccordingtoFRS139,loanandreceivablearevaluedatamortizedcost.arevaluedatamortizedcost.Forshort-liveddebtssuchastradeForshort-liveddebtssuchastradereceivablesonnormalcommercialterm,thereceivablesonnormalcommercialterm,thecarryingamountistheamountofdebtslesscarryingamountistheamountofdebtslessanydoubtfuldebtallowances.(refertoarticleanydoubtfuldebtallowances.(refertoarticleonTheKPMGGuide:FRS139FinancialonTheKPMGGuide:FRS139FinancialInstruments:RecognitionandMeasurement)Instruments:RecognitionandMeasurement)2222Shorttermaccountsreceivableareshownattheirnetrealizablevalueasfollows:RMAccountsReceivable(gross)AccountsReceivable(gross)XXXXXXLess:Provisionforbad&doubtfuldebtsLess:Provisionforbad&doubtfuldebts _XX_XXAmortizedcostAmortizedcost XXXXValuation of Accounts Receivable2323Uncollectibles of Accounts ReceivablesItiscommonforcompaniestohaveuncollectedreceivables.Journalentriesinvolved:Dr.BaddebtsexpenseCr.AllowancefordoubtfuldebtsCompanieshavetoestimateIfcannotmaymakedirectwriteoffoftheuncollectibledebts2424Methodstoestimatebaddebts:Methodstoestimatebaddebts:i.percentageofsalesmethodi.percentageofsalesmethodii.percentageofreceivablesmethodii.percentageofreceivablesmethodiii.Agereceivablesanalysisiii.AgereceivablesanalysisHowever,FRS139onlyallowthethirdmethod.However,FRS139onlyallowthethirdmethod.-Focusisonprovidinganestimateof-Focusisonprovidinganestimateofaccountsaccountsreceivablevaluereceivablevalue-Usespastcollectionexperienceto-Usespastcollectionexperiencetoestimatebadestimatebaddebtexpensedebtexpense-Baddebtexpenseinthecurrentyearis-Baddebtexpenseinthecurrentyeariscalculatedbytakingintoaccountthecalculatedbytakingintoaccounttheexistingexistingbalanceintheprovisionforbadbalanceintheprovisionforbad&doubtfuldebts&doubtfuldebts2525Example:Aged Receivable AnalysisABC Sdn.Bhd.-Aging ScheduleCustomerCustomerBalanceBalanceRMRM60120Days120DaysRMRMHarunHarun98,00098,00080,00080,000$18,000$18,000RashidRashid320,000320,000320,000320,000KumarKumar55,00055,00055,00055,000ChongChong74,00074,00060,00060,00014,00014,000547,000547,000460,000460,00018,00018,00014,00014,00055,00055,000EstimatedEstimatedUncollectiblUncollectible e4%4%15%15%20%20%25%25%2626Calculate uncollectible accounts(bad debts)expense:460,000*.04RM18,400 18,000*.15 2,700 14,000*.20 2,800 55,000*.25 13,750Required balance in the Allowance for Doubtful debts RM37,650Less:Current Balance RM800 Bad Debts Expense RM36,85012Journal entries:DR Bad debts expense RM36,850 CR Allowance Doubtful debts RM36,850The Balance Sheet Approach Aged Receivable Analysis2727Write Off Bad DebtsMethods 1.Direct Write-Off 2.AllowanceNot based on the matchingBased on the matchingprincipleprinciple1Accounts are written-offEstimated bad debts arewhen determined uncollectiblematched against revenue2Appropriate only ifMust be followed ifamounts are not materialamounts are material32828Allowance(estimated)write offUsewhenitiscertainthatitcannotbeUsewhenitiscertainthatitcannotbecollected.collected.AllowanceaccountofthedoubtfuldebtsAllowanceaccountofthedoubtfuldebtsalreadyestimated.alreadyestimated.Onceconfirmcannotbecollected,debittheOnceconfirmcannotbecollected,debittheallowanceaccount,credittheARaccount.allowanceaccount,credittheARaccount.However,if unexpectedly the written off AR However,if unexpectedly the written off AR is paid,the entry is:is paid,the entry is:Cash xx Cash xx Allowance for bad debts xx Allowance for bad debts xx2929Direct write-off methodBaddebtexpenseisrecognisedorrecordedintheperiodinwhichitisdeterminedthataspecifictradedebtorcannotbecollected(cashbasis).3030 AccountsarewrittenoffwhenaspecificcustomersdebtAccountsarewrittenoffwhenaspecificcustomersdebtisdetermineduncollectibleisdetermineduncollectible Method:IncreaseMethod:IncreaseBad Debt ExpenseBad Debt ExpenseandDecreaseandDecreaseAccounts ReceivableAccounts Receivable JournalentriesJournalentriesDRBadDebtExpenseDRBadDebtExpenseRM100RM100CRAccountsReceivable-CustomerARM100CRAccountsReceivable-CustomerARM100 Direct write off method3131Thedirectwrite-offmethoddoesnotmatchThedirectwrite-offmethoddoesnotmatchrevenuesagainstexpensesrevenuesagainstexpensese.g.IfthesalewasmadeinOctober2003,bute.g.IfthesalewasmadeinOctober2003,buttheuncollectibleisrecognizedinMarch2004,theuncollectibleisrecognizedinMarch2004,thentherevenueofacompanywiththentherevenueofacompanywithDecemberFYEwouldberecognizedin2003DecemberFYEwouldberecognizedin2003anditsexpensein2004.anditsexpensein2004.Generally,mostcompanies,inpractice,preferGenerally,mostcompanies,inpractice,prefertheallowancemethod.theallowancemethod.TheallowancemethodmadeaprovisionofTheallowancemethodmadeaprovisionofuncollectibledebtsuncollectibledebtsDirect write off method3232Collection of AR After Writing Off Bad Debts under direct write off methodIf the account is collected,after being written off,then:Dr.Cash Cr.Bad debts Recovered(for the amount collected)-the bad debts recovered will be reported as“other income”in IS.3333Section 3:Assignment&Factoring of Accounts Receivables 3434 The holder of accounts or notes receivable may The holder of accounts or notes receivable may transfer them transfer them for cashfor cash.The transfer may be:The transfer may be:assignment(secured borrowing)or assignment(secured borrowing)or factoring(a sale of receivables)factoring(a sale of receivables)Assigning/pledgingAssigning/pledging accounts receivable means accounts receivable means using them as collateral for a loan.Holder using them as collateral for a loan.Holder retainsretains ownership.ownership.Factoring Factoring accounts receivable means selling accounts receivable means selling them.them.Factoring can be Factoring can be with recourse with recourse or or without without recourse.Recourse recourse.Recourse refers to ultimate refers to ultimate responsibility for payment.responsibility for payment.3535Why use receivables as a source of cash?Providing customer financing is mandatory in Providing customer financing is mandatory in many industries,e.g.autos,industrial and farm many industries,e.g.autos,industrial and farm equipment,durable goods.equipment,durable goods.Access to normal financing may be unavailable or Access to normal financing may be unavailable or expensive,e.g.,further borrowing may violate expensive,e.g.,further borrowing may violate existing debt covenants.existing debt covenants.Seller may prefer to leave billing and collection to a Seller may prefer to leave billing and collection to a more specialized agencymore specialized agency.Receivables financing may be cheaper than debt,Receivables financing may be cheaper than debt,as the former conveys ownership rights to the as the former conveys ownership rights to the purchaserpurchaser.3636Assignment of receivablesTradedebtmaybeassignedorpledgedwithaTradedebtmaybeassignedorpledgedwithabankertoobtainfundstomeetcompanyscashbankertoobtainfundstomeetcompanyscashneeds.needs.TradedebtsareusedascollateralstoobtainTradedebtsareusedascollateralstoobtainthefinancing.thefinancing.RiskofbaddebtsarenotpassedontotheRiskofbaddebtsarenotpassedontothebankerbecauseithasthefullrecourseonthebankerbecauseithasthefullrecourseonthecompanyintheeventthatthetradedebtorscompanyintheeventthatthetradedebtorsareunabletosettletheirdebts.areunabletosettletheirdebts.3737Assignment of receivablesBillofexchangetradedebtfinancingarrangementstoacknowledgeitsliability.Thetradedebtsareremainedintheaccountingrecordsandthecashreceivedandthecorrespondingbillpayableshouldberecognizedintheaccounts.3838Assignment of receivables TransferorrecordsfornotepayableandfinanceTransferorrecordsfornotepayableandfinancecharge.Noeffectonaccountingforaccountscharge.Noeffectonaccountingforaccountsreceivable.receivable.Transferorcollectsaccountsreceivable.Transferorcollectsaccountsreceivable.Transferorrecordssalesreturnsandsalesdiscounts.Transferorrecordssalesreturnsandsalesdiscounts.Transferorabsorbsbaddebtsexpense.Transferorabsorbsbaddebtsexpense.Transferorrecordsinterestexpenseonnotespayable.Transferorrecordsinterestexpenseonnotespayable.TransferorpaysonthenoteperiodicallyfromTransferorpaysonthenoteperiodicallyfromcollections.collections.Meanwhile,thebankerwillrecordfornotereceivables,Meanwhile,thebankerwillrecordfornotereceivables,financerevenue,interestrevenueandcashpaidandfinancerevenue,interestrevenueandcashpaidandreceived.received.3939Assignment of re