Financial Accounting Terms Dictionary

U.S. GAAP Codification IFRS International Standards Accounting Topics


Financial Accounting Terms
Accounts Receivable


U.S. GAAP Codification Accounting TermsAccounting Textbooks
Financial Accounting Intermediate Accounting Advanced Accounting
Accounting Standards ASC Accounting by Topic,  Accounting Jobs

 
   
Accounts Receivable
  

Accounts receivable

Accounts receivables represent the amounts to be collected from the customers who purchased the company's products on credit.
 

Trade discounts

An example
 
Volume discount: Discount based on the sale volume
   Price is $20 per unit
   Price is $19 per unit for the purchases of more than 100 units
   $1 per unit is volume discount
  

Cash discounts

Seller can offer to provide cash discounts for the amount paid within a normal credit period.
 
An example
   Price is $60 per unit for credit sales
   If cash is paid at the time of sale, buyers get 3% discount
  
Another example
   Price is $60 per unit
   If buyers pay within 10 days, they get 2% discount
  

Terms of payment

An example
 
2/10, net 30
   2% discount for the amount paid within 10 days
   remaining amount is due in 30 days
  

Bad debts expense

The amount of accounts receivable that became uncollectible.
 
Two methods of recording bad debts expense
   direct write off method
   Allowance method 

Direct write off method

Bad debts expense is directly charged to accounts receivable as it becomes uncollectible.
 
Journal entry example
  (Debit)   Bad debts expense          5,000
      (Credit)   Accounts receivable               5,000
 

Allowance method

At the end of each period, the amount of potentially uncollectible accounts receivable is estimated and recorded as the "allowance for doubtful accounts"
 
Journal entry examples
  1. December 31, 20X1
      The estimated amount of potentially uncollectible accounts receivable is $20,000.
 
  (Debit)   Bad debts expense                    20,000
      (Credit)   Allowance for doubtful accounts       20,000
   
   2. On January 15, 20X2
      One customer filed bankruptcy and $3,000 receivable from that customer should be written off.

  (Debit)   Allowance for doubtful accounts     3,000
      (Credit)   Accounts receivable                                3,000

Allowance for doubtful accounts

Methods of estimating the amount of potentially uncollectible accounts receivable
 
1. Based on the percentage of sales amount
2. Based on the percentage of accounts receivable amount
3. Based on the aging schedule
  

% of sales method

An example
 
Entity A estimates that 3% of annual sales will be uncollectible.
Sales for 20X1 was $1,000,000
 
Journal entry example
  (Debit)   Bad debts expense          30,000
      (Credit)   Accounts receivable               30,000
  

% of receivable balance method

An example
 
Entity A estimates that 6% of accounts receivable at the end of period will become uncollectible.
Accounts receivable at December 31, 20X1 was $400,000
 
Journal entry example
  (Debit)   Bad debts expense          24,000
      (Credit)   Accounts receivable               24,000
 

     


 
 

Aging schedule method

Aging schedule of accounts receivable analyzes how long the accounts receivable balances have be outstanding.
 
An example
Entity A estimates different rates of bad debts depending on the age of accounts receivable balances.
    

Age of balance

Balances

% uncollectible

Allowance

0 - 30 days

$50,000

2%

$1,000

31 - 60 days

$30,000

4%

$1,200

61 - 90 days

$20,000

7%

$1,400

Over 90 days

$10,000

10%

$1,000

Total

$110,000

 

$4,600

 

Aging schedule method, another example

 Another example
Entity A estimates different rates of bad debts depending on the age of accounts receivable balances.
     

Age of balance

Balances

% uncollectible

0 - 30 days

$80,000

2%

31 - 60 days

$60,000

3%

61 - 90 days

$50,000

7%

Over 90 days

$20,000

10%

Total

$210,000

 

 

What is the estimated amount of allowance for doubtful accounts?
 

Age of balance

Balances

% uncollectible

Allowance

0 - 30 days

$80,000

2%

$1,600

31 - 60 days

$60,000

3%

$1,800

61 - 90 days

$50,000

7%

$3,500

Over 90 days

$20,000

10%

$2,000

Total

$210,000

 

$8,900

  

       





U.S. GAAP by Codification Topic 
 
 105  GAAP Hierarchy 
 105  GAAP History 

 205  Presentation of Financial Statements 
 205-20 Discontinued Operations 
 210  Balance Sheet 
 210-20 Offsetting 
 220  Comprehensive Income 
 225  Income Statement 
 225-20 Extraordinary and Unusual Items 
 230  Statement of Cash Flows 
 250  Accounting Changes and Error Corrections 
 260  Earnings per Share 
 270  Interim Reporting
 
 310  Impairment of a Loan
 320  Investment Securities 
 320  Other-Than-Temporary Impairments, FSP FAS 115-2 
 320-10-05 Overview of Investments in Other Entities 
 320-10-35 Reclassification of Investments in Securities
 323-10 Equity Method Investments
 323-30 Investments in Partnerships and Joint Ventures 
 325-20 Cost Method Investments 
 330  Inventory

 340-20 Capitalized Advertising Costs 
 350-20 Goodwill 
 350-30 Intangibles Other than Goodwill 
 350-40 Internal-Use Software 
 350-50 Website Development Costs 
 360  Property, Plant and Equipment
 360-20 Real Estate Sales 
 
 410  Asset Retirement and Environmental Obligations 
 420  Exit or Disposal Cost Obligations 
 450  Contingencies 
 450-20 Loss Contingencies 
 450-30 Gain Contingencies
 480  Redeemable Financial Instruments 

 505-20 Stock Dividends, Stock Splits 
 505-30 Treasury Stock 

 605  SEC Staff Accounting Bulletin, Topic 13 
 605-25 Revenue Recognition - Multiple Element Arrangements 
 
 715-30 Defined Benefit Plans - Pension
 718  Share-Based Payment 
 730  Research and Development 
 730-20 Research and Development Arrangements 

 805  Business Combinations  
 810  Consolidation 
 810  Noncontrolling Interests 
 810  Consolidation of Variable Interest Entities, SFAS 167 
 
 815  Derivatives and Hedging Overview 

 820  Fair Value Measurements  
 820  Fair value when the markets are not active, FSP FAS 157-4
 825  Fair Value Option 

 830  Foreign Currency Matters 
 830-20 Foreign Currency Transactions 
 830-30 Translation of Financial Statements 
 835  Interest 
 835-20 Capitalization of Interest 
 835-30 Imputation of Interest 

 840  Leases 
 840-20 Operating Leases 
 840-30 Capital Leases 
 840-40 Sale-Leaseback Transactions
 845  Nonmonetary Transactions 

 855  Subsequent Events 
 860-20 Sale of Financial Assets, SFAS 166 
 860-50 Servicing Assets and Liabilities, SFAS 156 

 985-20 Costs of software to be sold  

 



U.S. GAAP by Topic
Accounting Topics










Copyright AccountingStudy.com.TM  All Rights Reserved.