Libby2ce-Ch07-北美会计原理.ppt

FinancialAccounting RobertLibby PatriciaA Libby DanielG Short GeorgeKanaan MaureenGowing SecondCANADIANedition Chapter7 ReportingandInterpretingSalesRevenue Receivables andCash AccountingforSalesRevenue Therevenueprinciplerequiresthatrevenuesberecordedwhenearned Anexchangehastakenplace Collectionisprobable Theearningsprocessisnearlycomplete ReportingNetSales Companiesrecordsalesdiscounts salesreturnsandallowances andcreditcarddiscountsseparatelytoallowmanagementtomonitorthesetransactions CreditCardSalestoConsumers Companiesacceptcreditcardsforseveralreasons Toincreasesales Toavoidprovidingcreditdirectlytocustomers Toavoidlossesduetobadcheques Toreceivepaymentquicker Whencreditcardsalesaremade thecompanymustpaythecreditcardcompanyafeefortheserviceitprovides CreditCardSalestoConsumers CreditCardSalestoConsumers OnJanuary2 astorehadcreditcardsalesof 3 000 Thecreditcardcompanychargesa3 servicefee Preparethejournalentrytorecordthesesales CreditCardSalestoConsumers OnJanuary2 astorehadcreditcardsalesof 3 000 Thecreditcardcompanychargesa3 servicefee Preparethejournalentrytorecordthesesales CreditCardDiscountsarereportedasacontra revenueaccount SalestoBusinessesonAccount Whencompaniesallowcustomerstopurchasemerchandiseonanopenaccount thecustomerpromisestopaythecompanyinthefutureforthepurchase 2 10 n 30 Whencustomerspurchaseonopenaccount theymaybeofferedasalesdiscounttoencourageearlypayment Readas Twoten netthirty SalestoBusinessesonAccount 2 10 n 30 SalestoBusinessesonAccount OnJanuary6 Gildansold 1 000ofmerchandiseoncreditwithtermsof2 10 n 30 Preparethejournalentrytorecordthesale SalestoBusinessesonAccount OnJanuary6 Gildansold 1 000ofmerchandiseoncreditwithtermsof2 10 n 30 Preparethejournalentrytorecordthesale SalestoBusinessesonAccount OnJanuary14 GildanreceivestheappropriatepaymentfromthecustomerfortheJanuary6sale Preparetherequiredjournalentry SalestoBusinessesonAccount 1 000 2 20salesdiscount 1 000 20 980cashreceipt OnJanuary14 GildanreceivestheappropriatepaymentfromthecustomerfortheJanuary6sale Preparetherequiredjournalentry SalestoBusinessesonAccount IfthecustomerremitstheappropriateamountonJanuary20insteadofJanuary14 whatentrywouldGildanrecord SalestoBusinessesonAccount Sincethecustomerpaidafterthediscountperiod asalesdiscountisnotgranted SalestoBusinessesonAccount IfthecustomerremitstheappropriateamountonJanuary20insteadofJanuary14 whatentrywouldGildanrecord SalesReturnsandAllowances Debitedfordamagedmerchandise Debitedforreturnedmerchandise Contrarevenueaccount SalesReturnsandAllowances OnJuly8 TheT ShirtStorereturns 500ofshirtsoriginallypurchasedonaccountfromGildan Preparetherequiredjournalentry SalesReturnsandAllowances OnJuly8 TheT ShirtStorereturns 500ofshirtsoriginallypurchasedonaccountfromGildan Preparetherequiredjournalentry GrossProfitPercentage In2004 Gildanreportedgrossprofitof 154 671 718onsalesof 533 367 537 Allotherthingsequal ahighergrossprofitresultsinhighernetincome GrossProfitPercentage GrossProfitPercentage 154 671 718 533 367 537 29 0 GrossProfitPercentage GrossProfitNetSales Allotherthingsequal ahighergrossprofitresultsinhighernetincome MeasuringandReportingReceivables AccountsReceivable MeasuringandReportingReceivables AccountingforBadDebts Baddebtsresultfromcreditcustomerswhowillnotpaythebusinesstheamounttheyowe regardlessofcollectionefforts AccountingforBadDebts MatchingPrinciple BadDebtExpense SalesRevenue Recordinsameaccountingperiod AccountingforBadDebts Mostbusinessesrecordanestimateofthebaddebtexpensebyanadjustingentryattheendoftheaccountingperiod RecordingBadDebtExpenseEstimates AssumeGildanestimatedbaddebtexpensefor2005tobe 2 383 000 Preparetheadjustingentry RecordingBadDebtExpenseEstimates BadDebtExpenseisnormallyclassifiedasasellingexpenseandisclosedatyear end AssumeGildanestimatedbaddebtexpensefor2005tobe 2 383 000 Preparetheadjustingentry AllowanceforDoubtfulAccounts Amountthebusinessexpectstocollect BalanceSheetDisclosure WritingOffUncollectibleAccounts Whenitisclearthataspecificcustomer saccountreceivablewillbeuncollectible theamountshouldberemovedfromtheAccountsReceivableaccountandchargedtotheAllowanceforDoubtfulAccounts WritingOffUncollectibleAccounts AssumeonMay6 Gildanwroteoffaspecificaccountreceivablewithabalanceof 2 500 Preparetherequiredjournalentry WritingOffUncollectibleAccounts AssumeonMay6 Gildanwroteoffaspecificaccountreceivablewithabalanceof 2 500 Preparetherequiredjournalentry WritingOffUncollectibleAccounts Assumethatbeforethewrite offentry Gildan sAccountsReceivablebalancewas 81 000 000andtheAllowanceforDoubtfulAccountsbalancewas 2 000 000 Let sseewhateffectthewrite offhadontheseaccounts WritingOffUncollectibleAccounts Noticethatthewrite offdidnotchangethenetrealizablevaluenordiditaffectanyincomestatementaccounts MethodsforEstimatingBadDebts PercentageofcreditsalesorAgingofaccountsreceivable PercentageofCreditSales Baddebtpercentageisbasedonactualuncollectibleaccountsfromprioryears creditsales ThefocusisondeterminingtheamounttorecordontheincomestatementasBadDebtExpense PercentageofCreditSales PercentageofCreditSales In2005 Kid sClotheshadcreditsalesof 60 000 Pastexperienceindicatesthatbaddebtsareonepercentofsales Whatistheestimateofbaddebtsexpensefor2005 PercentageofCreditSales In2005 Kid sClotheshadcreditsalesof 60 000 Pastexperienceindicatesthatbaddebtsareonepercentofsales Whatistheestimateofbaddebtsexpensefor2005 60 000 01 600Now preparetheadjustingentry PercentageofCreditSales AgingofAccountsReceivable ThefocusisondeterminingthedesiredbalanceintheAllowanceforDoubtfulAccountsonthebalancesheet AgingofAccountsReceivable AgingSchedule Eachcustomer saccountisagedbybreakingdownthebalancebyshowingtheage innumberofdays ofeachpartofthebalance AnagingofaccountsreceivableforKid sClothesin2005mightlooklikethis AgingSchedule Basedonpastexperience thebusinessestimatesthepercentageofuncollectibleaccountsineachtimecategory AgingSchedule Thesepercentagesarethenmultipliedbytheappropriatecolumntotals AgingSchedule Thecolumntotalsarethenaddedtoarriveatthetotalestimateofuncollectibleaccountsof 1 201 AgingofAccountsReceivable RecordtheDec 31 2005adjustingentryassumingthattheAllowanceforDoubtfulAccountscurrentlyhasa 50creditbalance AgingofAccountsReceivable Afterposting theAllowanceaccountwouldlooklikethis AgingofAccountsReceivable AllowanceforDoubtfulAccounts Noticethatthebalanceafteradjustmentisequaltotheestimateof 1 201basedontheaginganalysisperformedearlier ReceivableTurnover Thisratiomeasureshowquicklyacompanycollectsitsaccountsreceivable Gildanreported2004netsalesof 533 367 Thereceivableswere 64 260atSeptember29 2003 beg ofyear and 85 317atOctober5 2004 endofyear Allamountsinthousands ReceivableTurnover Thisratiomeasureshowquicklyacompanycollectsitsaccountsreceivable FocusonCashFlows SalesRevenue CashCollectedfromCustomers InternalControls InternalControlsaretheprocessesbywhichthecompany sboardofdirectors management andotherpersonnelprovidereasonableassuranceregardingthereliabilityofthecompany sfinancialreporting theeffectivenessandefficiencyofitsoperations anditscompliancewithapplicablelawsandregulations ControlsOverAccountsReceivable Toguardagainsttheextendingcredittonon worthycustomers thefollowingpracticescanhelpminimizebaddebts Requireapprovalofcustomer scredithistorybyapersonindependentofthesalesandcollectionfunctions Monitortheageofaccountsreceivableperiodicallyandcontactcustomerswithoverduepayments Rewardbothsalesandcollectionpersonnelforspeedycollectionssothattheyworkasateam Nowlet sstartourdiscussionofcash CashandCashEquivalents Cheques MoneyOrders BankDrafts CertificatesofDeposit T Bills InternalControlofCash Cashistheassetmostsusceptibletotheftandfraud Internalcontrolreferstopoliciesandproceduresthataredesignedto InternalControlofCash InternalControlofCash DailyDeposits PurchaseApproval PrenumberedCheques PaymentApproval VerifySignatures BankReconciliations BankReconciliation Explainsthedifferencebetweencashrepor