AccountingBasics英语会计基础教学课件6.pptx

1、 Identify the different types of receivables Explain how accounts receivable are initially recognised and measured Explain how accounts receivable are subsequently measured Explain how note receivables are recognised and calculate the interest on notes receivable Describe how receivables are reporte

2、d in financial statements Receivables(debtors)refers to amounts due from individuals and other entities that are expected to be collected in cash Types of receivables:Accounts receivable are amounts owed by customers on account Notes receivable are claims for which formal instruments of credit are i

3、ssued evidencing the debt Other receivables include non-trade receivables such as interest receivable,loans,advances and GST receivablePowerPoint presentation by Dr Anne Abraham,University of Western Sydney3LO1 Notes and accounts receivable that result from sales transactions are often called trade

4、receivables Three primary accounting issues associated with accounts receivable are:Recognising accounts receivable Valuing accounts receivable Selling accounts receivablesPowerPoint presentation by Dr Anne Abraham,University of Western Sydney4 The effect of sales of inventory on accounts receivable

5、ExampleOn 1 July,Lauren Ltd sells inventory to Polo Ltd on account for$1000 terms 2/10,n/30PowerPoint presentation by Dr Anne Abraham,University of Western Sydney5LO2On 5 July,Polo Ltd returns inventory worth$100On 5 July,Lauren Ltd receives payment from Polo Ltd for balance duePowerPoint presentati

6、on by Dr Anne Abraham,University of Western Sydney6PowerPoint presentation by Dr Anne Abraham,University of Western Sydney7On 3 May ABC Ltd sells inventory on account to XYZ Ltd for$2000,terms 2/10,n/30.XYZ returns inventory worth$600 on 8 May.On 12 May ABC receives the balance due of A.$1400B.$1960

7、 C.$1372D.None of the above LO2 Receivables are initially recognised at fair value(i.e.invoice amount)At each reporting date,entities are required to assess whether there is objective evidence that receivables are impaired(i.e.unlikely to be received)well overdue,bankruptcy,financial difficultyPower

8、Point presentation by Dr Anne Abraham,University of Western Sydney8LO3 Impairment loss is recognised by comparing carrying amount of receivable with present value of estimated cash flows from receivable Entities must assess impairment for all receivables The impairment loss must be recognised in the

9、 income statement as a lossPowerPoint presentation by Dr Anne Abraham,University of Western Sydney9 There are two methods to reduce carrying amount of receivables1.Reduced directly(direct write-off method)2.Reduced through use of allowance account(allowance method)PowerPoint presentation by Dr Anne

10、Abraham,University of Western Sydney101.Direct write-off method Bad debt losses are not anticipated and no allowance account is used No entries are made for bad debts until an account is determined to be uncollectable at which time the loss is charged to Bad Debts Expense Carrying amount of accounts

11、 receivable is reduced in statement of financial positionPowerPoint presentation by Dr Anne Abraham,University of Western Sydney11ExampleBennett Ltd writes off Jackie Ltds$920 balance as impaired on 12 DecemberPowerPoint presentation by Dr Anne Abraham,University of Western Sydney12Dec 12 Bad Debts

12、Expense 920 Accounts Receivable Jackie Ltd 920(To record write-off of Jackie Ltd account)2.Allowance method Impaired accounts receivable are estimated Treated as an expense and charged against revenue Allowance for Impairment is a contra asset account As part of adjusting entry at end of each period

13、PowerPoint presentation by Dr Anne Abraham,University of Western Sydney13Date Bad Debts Expense Debit Allowance for Impairment Credit(To record estimate of impaired receivables)2.Allowance method contd When a specific amount is written off,actual uncollectable is debited to Allowance for Impairment

14、and credited to Accounts ReceivablePowerPoint presentation by Dr Anne Abraham,University of Western Sydney14Date Allowance for Impairment Debit Accounts ReceivableCredit(To record estimate of impaired receivables)Recovery of an uncollectable account 2 journal entriesPowerPoint presentation by Dr Ann

15、e Abraham,University of Western Sydney15Dec 1 Accounts Receivable Debit Allowance for Impairment Credit (To reverse write-off)Dec 1 Cash Debit Accounts Receivable Credit (To record collection)Earthcare reported the following information at 30 June 2010:Accounts receivable$1 020 000Allowance for impa

16、irment 60 000During 2010-11,the business had the following transactions related to receivables 16LO31.Write-offs of accounts receivable$65 000deemed uncollectable 2.Estimated impaired receivables 95 000based on objective evidence 3.Recovery of impaired receivables20 000 previously written off as unc

17、ollectable17Instructions:Prepare the journal entries to record each of the 3 transactions.1819 Requires detailed calculation of estimated of cash to be received Formula-based methods can only be used for determining impairment losses if they produce an estimate close to what would be produced by com

18、paring carrying amount with estimated cash receivedPowerPoint presentation by Dr Anne Abraham,University of Western Sydney20 Two common methods1.Percentage of sales2.Percentage of receivables(or ageing of accounts receivable)PowerPoint presentation by Dr Anne Abraham,University of Western Sydney211.

19、Percentage of sales Estimates%of credit sales will be uncollectable Based on past experience and anticipated credit policy Emphasises income statement relationshipsPowerPoint presentation by Dr Anne Abraham,University of Western Sydney22Jun 30 Bad Debts Expenses 8 000 Allowance for Impairment 8 000

20、(To record estimated impairment loss for year)1.Percentage of sales Important:under the percentage of net credit sales method,any existing balance in the allowance for impairment account is ignored.The allowance for impairment account is simply adjusted each year by the percentage estimate.23 At 31

21、Dec 2010 Friends had a balance in its allowance for impairment account of$1,250.The net sales balance at 31 December 2010 was$35,000.Management estimated that 5%of net sales were likely to be uncollectable.Prepare the adjusting entry at the end of the period to record impaired receivables24LO3 Estim

22、ated impairment loss:252.Percentage of receivables Focuses on cash realisable value and reducing receivables by allowance Emphasis on statement of financial position relationshipsPowerPoint presentation by Dr Anne Abraham,University of Western Sydney26Jun 30 Bad Debts Expenses 1 700 Allowance for Im

23、pairment 1 700 (To adjust allowance account to total estimated uncollectable)2.Percentage of receivables Important:under this method,any existing balance(can be either Credit or Debit balance)in the allowance for impairment account is taken into consideration when determining the amount of the adjus

24、tment27 Assume now that Friends Ltd uses the ageing of accounts receivable method.Again,at 31 Dec 2010 the balance of the Allowance for impairment account was$1,250.An ageing schedule for Friends Ltd is Shown on the next slide28LO32.Percentage of receivables-ExamplePowerPoint presentation by Dr Anne

25、 Abraham,University of Western Sydney29Ageing of Accounts ReceivableTotal estimated impairment loss Total estimated impairment loss is equal to based on the ageing schedule This is the amount needed in the Allowance for impairment account at the end of the period.Remember that the beginning balance

26、was So,we need an adjusting entry to arrive at the new balance.30 At the end of the period,there was already in the Allowance for impairment account.So,the adjusting entry is31NOTES RECEIVABLE A promissory note is a written promise to pay a specified amount of money on demand or at a definite time M

27、ay be used When money is borrowed or lent When amount of transaction and credit period exceed normal limits To settle accounts receivable Two parties Payee(party to whom payment is to be made)Issuer(party making promise)PowerPoint presentation by Dr Anne Abraham,University of Western Sydney32LO4 Acc

28、ounting issues Determining maturity dates Computing interest Recognising notes receivable Valuing notes receivable Selling notes receivablePowerPoint presentation by Dr Anne Abraham,University of Western Sydney33NOTES RECEIVABLE Determining the maturity date The life of the note may be expressed in

29、terms of months days1.Life of note expressed in months The due date is found by counting the months from the date of issuee.g.,Maturity date of a 3 month note dated 1 May is PowerPoint presentation by Dr Anne Abraham,University of Western Sydney34(b)Life of note expressed in days Need to count the e

30、xact number of days Date of issue is omitted but due date is included e.g.,Maturity date of a 60-day note dated 17 July isPowerPoint presentation by Dr Anne Abraham,University of Western Sydney35Term of note60 daysDetermining the maturity date Calculating interest The interest rate specified on the

31、note is an annual rate of interest Basic formulaPowerPoint presentation by Dr Anne Abraham,University of Western Sydney36AnnualinterestrateFace valueof notex Time interms of1 yearInterestx=The fraction of a year that the note is outstandingCalculating interest ExamplesPowerPoint presentation by Dr A

32、nne Abraham,University of Western Sydney37 Terms of NoteInterest Computation face x rate x time =interest$730,18%,120 days$1000,15%,6 months$2000,12%,1 year PowerPoint presentation by Dr Anne Abraham,University of Western Sydney38Question 5A note for$4118 was issued at 8.8%for 240 days.Calculate the

33、 interest amount.A.$241.59 B.$24 158.93 C.$86 972.16 D.$238.28 LO4Recognising notes receivable The note receivable is recorded at its face value No interest revenue is reported when the note is accepted because the income recognition principle does not recognise income until earnedPowerPoint present

34、ation by Dr Anne Abraham,University of Western Sydney39May 1 Notes ReceivableDebit Accounts Receivable/cash/sales Credit (To record acceptance of note receivable)Presentation In the statement of financial position,short-term receivables are reported in the current assets section below short-term inv

35、estments Presentation must include report of both the gross value and allowance for any impairmentPowerPoint presentation by Dr Anne Abraham,University of Western Sydney40LO5 Statement of financial positionPowerPoint presentation by Dr Anne Abraham,University of Western Sydney41Current assetsCash$14

36、 800Accounts receivable$200 000Less:Allowance for doubtful debts 12 000 188 000Inventory 310 000Prepaid expenses 25 000Total current assets$537 800FITTING FURNITUREStatement of Financial Position(partial)statement of financial positionPowerPoint presentation by Dr Anne Abraham,University of Western

37、Sydney42 Before write-off After write-offAccounts receivable$200 000$199 500Allowance for impairment 12 000 11 500Cash realisable value$188 000$188 000 Explain a current liability,and identify the major types of current liabilities Describe the accounting for notes payables Explain the accounting fo

38、r other current liabilities Explain the financial statement presentation of current liabilities Describe the accounting and disclosure requirements for provisions and contingent liabilitiesACCOUNTING FOR CURRENT LIABILITIES A current liability is a debt with two key features:Expected to be paid from

39、 existing currents assets or through the creation of other current liabilities Will be paid within 1 year or the operating cycle,whichever is longerPowerPoint presentation by Dr Anne Abraham,University of Western Sydney45LO1ACCOUNTING FOR CURRENT LIABILITIES Current liabilities include:Notes payable

40、 Accounts payable Unearned revenue Accrued liabilitiesPowerPoint presentation by Dr Anne Abraham,University of Western Sydney46Notes payable Notes payable record obligations in the form of written notes Usually require borrower to pay interest or borrowing costs which accrues over life of note Frequ

41、ently issued to meet short-term financing needs Issued for varying periods of time Those notes due for payment within 1 year of the end of the financial year are usually classified as current liabilitiesPowerPoint presentation by Dr Anne Abraham,University of Western Sydney47LO2Question 6On 1 Januar

42、y 2010,Yumcha Software Ltd Borrowed$15 000 in cash from Amsterdam Bank on a 4-month,8%,$15 000 note.Requirement:1.Prepare the journal entry on 1 January,2.Prepare the adjusting entry as at 31 March3.Prepare the journal entry at maturity48LO2 Calculation of interest49Interest =Face value x Annual x T

43、ime in terms of note interest rate of 1 year Question 6 Question 6 Journal entry when note issued Adjusting entry50 Journal entry to settle liabilitiesPowerPoint presentation by Dr Anne Abraham,University of Western Sydney51Question 6 Goods and services tax(GST)payable The GST is expressed as 10%of

44、the total sales price of the good or service being purchased Retailer collects tax from customer when the sale occurs and remits it to the ATO on monthly,quarterly or annual basis Separate accounts for GST collected(current liability)and GST Paid(current asset)PowerPoint presentation by Dr Anne Abra

45、ham,University of Western Sydney52LO3Unearned revenue Unearned revenue is revenue that is received before goods are delivered or services are rendered e.g.,Purchase of plane ticketsMagazine subscriptionsSeason passes to sporting events Two journal entries are required:When the advance payment is rec

46、eived When the revenue is earnedPowerPoint presentation by Dr Anne Abraham,University of Western Sydney53PowerPoint presentation by Dr Anne Abraham,University of Western Sydney54Question 7Stanley Travel Magazine typically sells subscriptions on an annual basis,and publishes six times a year.The maga

47、zine sold 50,000 yearly subscriptions in January at$105 each.What entry is made in January to record the sale of the subscriptions?a.Dr Subscriptions Receivable$5,250,000Cr Subscription Revenue$5,250,000b.Dr Cash$5,250,000Cr Unearned Subscription Revenue$5,250,000c.Dr Subscriptions Receivable$5,250,

48、000Cr Unearned Subscription Revenue$5,250,000d.Dr Prepaid Subscriptions$5,250,000Cr Cash$5,250,000LO3Bank overdraft A bank overdraft is a line of credit extended on an existing bank account,or allowed on the commencement of a new bank account Firms use this overdraft as a normal account,but they owe

49、 money instead of saving it The borrower pays interest on the overdue amountPowerPoint presentation by Dr Anne Abraham,University of Western Sydney55Current maturities of long-term debt Firms often have a portion of long-term debt that falls due in the current year It is not necessary to prepare an

50、adjusting entry to recognise current maturities of long-term debt The proper classification is recognised on the statement of financial performance PowerPoint presentation by Dr Anne Abraham,University of Western Sydney56Financial statement presentationPresentation Current liabilities are the first