会计学人大出版英文版第23版Chap007.ppt

1、Cash and Receivables,7,Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.,McGraw-Hill/Irwin,Cash and Cash Equivalents,Balances inchecking accounts,Currency and coins,Cash equivalents are short-term, highly liquid investments that can be readily converted to cash.,Money marketfund

2、s,Treasury bills,Commercialpaper,Cash,Items for deposit such as checks and money orders from customers,Internal Control,Encourages adherence to company policiesand procedures,Promotes operational efficiency,Minimizes errorsand theft,Enhances the reliability and accuracy of accounting data,Internal C

3、ontrol Procedures,Cash Receipts Separate responsibilities for receiving cash, recording cash transactions, and reconciling cash balances. Match the amount of cash received with the amount of cash deposited. Close supervision of cash-handling and cash-recording activities.,Cash Disbursements All disb

4、ursements, except petty cash, made by check. Separate responsibilities for cash disbursement documents, check authorization, check signing, and record keeping. Checks should be signed only by authorized individuals.,Restricted Cash andCompensating Balances,Restricted Cash Managements intent to use a

5、 certain amountof cash for a specific purpose future plant expansion, future payment of debt. Compensating Balance Minimum balance that must bemaintained in a companys bankaccount as support for fundsborrowed from the bank.,U.S. GAAP vs. IFRS,Bank overdrafts are treated as liabilities.,In general, c

6、ash and cash equivalents are treated similarly under IFRS and U.S. GAAP. One difference is highlighted below.,Bank overdrafts may be offset against other cash accounts.,Accounts Receivable,Result from the credit sales of goods or services to customers.,Are classified as current assets.,Are recorded

7、net of trade discounts.,increase sales,encourage early payment,increase likelihood of collections,Cash discounts,Cash Discounts,2/10,n/30,Cash Discounts,Cash Discounts,Sales are recorded at the invoice amounts.,Sales discounts are recorded as reduction of revenue if payment is received within the di

8、scount period.,Gross Method,Sales are recorded at the invoice amount less the discount.,Sales discounts forfeited are recordedas interest revenue if payment is received after the discount period.,Net Method,Cash Discounts,On October 5, Hawthorne sold merchandise for $20,000 with terms 2/10, n/30. On

9、 October 14, the customer sent a check for $13,720 taking advantage of the discount to settle $14,000 of the amount. On November 4, the customer paid the remaining $6,000.,Merchandise may be returned by a customer to a supplier.,A special price reduction, called an allowance, may be given as an ince

10、ntive to keep the merchandise.,Sales Returns,To avoid misstating the financial statements, sales revenue and accounts receivable should be reduced by the amount of returns in the period of sale if the amount of returns is anticipated to be material.,Sales Returns,During the first year of operations,

11、 Hawthorne sold $2,000,000 of merchandise that had cost them $1,200,000 (60%). Industry experience indicates 10% return rate. During the year $130,000 was returned prior to customer payment. Record the returns and the end of the year adjustment.,Actual Returns Sales returns130,000 Accounts receivabl

12、e 130,000 Inventory 78,000 Cost of goods sold (60%) 78,000 Adjusting Entries Sales returns 70,000 Allowance for sales returns 70,000 Inventory-estimated returns 42,000 Cost of goods sold (60%) 42,000,Uncollectible Accounts Receivable,Bad debts result from credit customers who are unable to pay the a

13、mount they owe, regardless of continuing collection efforts.,PAST DUE,In conformity with the matching principle, bad debt expense should be recorded in the same accounting period in which the sales related to the uncollectible account were recorded.,Uncollectible Accounts Receivable,Most businesses

14、record an estimate of the bad debt expense by an adjusting entry at the end of the accounting period.,Bad debt expensexxx Allowance for uncollectible accounts xxx,Allowance for Uncollectible Accounts,Net realizable value is the amount of the accounts receivable that the business expects to collect.,

15、Accounts Receivable Less: Allowance for Uncollectible Accounts Net Realizable Value,Income Statement Approach Balance Sheet Approach Composite Rate Aging of Receivables,Income Statement Approach,Focuses on past credit sales to make estimate of bad debt expense. Emphasizes the matching principle by e

16、stimating the bad debt expense associated with the current periods credit sales.,Bad debt expense is computed as follows:,In 2012, MusicLand has credit sales of $400,000 and estimates that 0.6% of credit sales are uncollectible. What is Bad Debt Expense for 2012?,Income Statement Approach,MusicLand

17、computes estimated Bad Debt Expense of $2,400.,Bad debt expense2,400 Allowance for uncollectible accounts 2,400,Balance Sheet Approach,Focuses on the collectability of accounts receivable to make the estimate of uncollectible accounts. Involves the direct computation of the desired balance in the al

18、lowance for uncollectible accounts.,Compute the desired balance in the Allowance for Uncollectible Accounts. Bad Debt Expense is computed as:,On Dec. 31, 2012, MusicLand has $50,000 in Accounts Receivable and a $200 credit balance in Allowance for Uncollectible Accounts. Past experience suggests tha

19、t 5% of receivables are uncollectible. What is MusicLands Bad Debt Expense for 2012?,Balance Sheet ApproachComposite Rate,Desired balance in Allowancefor Uncollectible Accounts,Balance Sheet ApproachComposite Rate,Bad debt expense2,300 Allowance for uncollectible accounts 2,300,Year-end Accounts Rec

20、eivable is broken down into age classifications.,Each age grouping has a different likelihood of being uncollectible.,Compute desired uncollectible amount.,Balance Sheet Approach Aging of Receivables,Compare desired uncollectible amount with the existing balance in theallowance account.,At December

21、31, 2012, the receivables for EastCo, Inc. were categorized as follows:,Balance Sheet Approach Aging of Receivables,Balance Sheet Approach Aging of Receivables,EastCos unadjusted balance in the allowance account is $500. Per the previous computation, the desired balance is $1,350.,Bad debt expense 8

22、50 Allowance for uncollectible accounts 850,Uncollectible Accounts,As accounts become uncollectible, this entry is made:,When a customer makes a payment after an account has been written off, two journal entries are required.,Allowance for uncollectible accounts 500 Accounts receivable 500,Accounts

23、receivable 500 Allowance for uncollectible accounts 500 Cash500 Accounts receivable 500,If uncollectible accounts are immaterial, bad debts are simply recorded as they occur (without the use of an allowance account).,Direct Write-off Method,Bad debts expense xxx Accounts receivable xxx,Notes Receiva

24、ble,A written promise to pay a specificamount at a specific future date.,Interest-Bearing Notes,On November 1, 2012, West, Inc. loans $25,000 to Winn Co. The note bears interest at 12% and is due on November 1, 2013. Prepare the journal entry on November 1, 2012, December 31, 2012, (year-end) and No

25、vember 1, 2013 for West.,November 1, 2012 Notes receivable 25,000 Cash 25,000 December 31, 2012 Interest receivable 500 Interest revenue 500 November 1, 2013 Cash 28,000 Note receivable 25,000 Interest receivable 500 Interest revenue 2,500,Noninterest-Bearing Notes,Actually do bear interest. Interes

26、t is deducted (discounted) from the face value of the note. Cash proceeds equal face value of note less discount.,Noninterest-Bearing Notes,On Jan. 1, 2012, West, Inc. accepted a $25,000 noninterest-bearing note from Winn, Co as payment for a sale. The note is discounted at 12% and is due on Dec. 31

27、, 2012. Prepare the journal entries on Jan. 1, 2012, and Dec. 31, 2012.,January 1, 2012 Notes receivable 25,000 Discount on notes receivable 3,000 Sales revenue 22,000 ($25,000 * 12% = $3,000) December 31, 2012 Cash 25,000 Discount on notes receivable 3,000 Interest revenue 3,000 Note receivable25,0

28、00,U.S. GAAP vs. IFRS,U.S. GAAP allows a “fair value option” for accounting for receivables. U.S. GAAP does not allow receivables to be accounted for as “available for sale” investments. U.S. GAAP requires more disaggregation of accounts and notes receivable in the balance sheet or notes.,In general

29、, IFRS and U.S. GAAP are very similar with respect to accounts receivable and notes receivable. Differences are highlighted below.,IFRS restricts the circumstances in which a “fair value option” for accounting for receivables is allowed. In the years between 2010 and 2012, companies may account for

30、receivables as “available for sale” investments if the approach is elected initially. After January 1, 2013, this treatment is no longer allowed.,Financing With Receivables,Companies may use their receivables to obtain immediate cash.,Sale of Receivables,Secured Borrowing,Factoring Arrangements,FACT

31、OR (Transferee),SUPPLIER (Transferor),RETAILER,A factor is a financial institution that buys receivablesfor cash, handles the billing and collection of thereceivables and charges a fee for the service.,Secured Borrowing,Sale of Receivables,Treat as a sale if all of these conditions are met: receivab

32、les are isolated from transferor. transferee has right to pledge or exchange receivables. transferor does not have control over the receivables. Transferor cannot repurchase receivable before maturity. Transferor cannot require returnof specific receivables.,Sale of Receivables,Without recourse An o

33、rdinary sale of receivables to the factor. Factor assumes all risk of uncollectibility. Control of receivable passes to the factor. Receivables are removed from the books, fair value of cash and other assets received is recorded, and a financing expense or loss is recognized.,With recourse Transfero

34、r (seller) retains risk of uncollectibility. If the transaction fails to meet the three conditions necessary to be classified as a sale, it will be treated as a secured borrowing.,Sale of Receivables,In December 2011, the Santa Teresa Glass Company factored accounts receivable that had a book value

35、of $600,000 to Factor Bank. The transfer was made without recourse. Under this arrangement, Santa Teresa transfers the $600,000 of receivables to Factor, and Factor immediately remits to Santa Teresa cash equal to 90% of the factored amount (90% $600,000 = $540,000). Factor retains the remaining 10%

36、 to cover its factoring fee (equal to 4% of the total factored amount; 4% $600,000 = $24,000) and to provide a cushion against potential sales returns and allowances.,Assume the same facts as above, except that Santa Teresa sold the receivables to Factor with recourse and estimates the fair value of

37、 the recourse obligation to be $5,000.,Interest receivable 5,000 Interest revenue 5,000,Transfers of Notes Receivable,On December 31, Stridewell accepted a nine-month 10 percent note for $200,000 from a customer. Three months later on March 31, Stridewell discounted the note at its local bank. The b

38、anks discount rate is 12 percent.,Before preparing the journal entry to record the discounting, Stridewell must record the accrued interest on the note from December 31 until March 31.,Transfers of Notes Receivable,Cash 202,100 Loss on sale of note receivable 2,900 Notes receivable 200,000 Interest

39、receivable 5,000,Deciding Whether to Account for a Transfer as a Sale or a Secured Borrowing,U.S. GAAP vs. IFRS,U.S. GAAP focuses on whether control of assets has shifted from the transferor to the transferee.,The U.S. GAAP and the IFRS approaches often lead to similar accounting treatment for transfers of receivables.,IFRS requires a more complex decision process. The company has to have transferred the rights to receive the cash flows from the receivable, and then considers whether the company has transferred “substantially all of the risks and rewards of ownership,” as w