ACCOUNTS RECEIVABLE
1.
2.
DEBIT
INITIAL VALUATION = starting price, initial recognition, face value,
face amount, or original invoice amount.
CREDIT SALES
Methods of
Recording
1. Sale of
Merchandise
2. Within the
discount
period
3. Beyond the
Discount
Period
CREDIT
JOURNALIZING
GROSS
NET METHOD
METHOD
Dr. A/R
Cr. Sales
Dr. Cash
Dr. Cash
Sales Discount
Cr. A/R
Cr. A/R
Dr. Cash
Dr. Cash
Cr. A/R
Cr. A/R
Sales Discount- forfeited
1.
ALLOWANCE FOR FREIGHT CHARGE
FOB Shipping Point
Freight Prepaid
Freight Collect
FOB Destination Point
Freight Prepaid
Freight Collect
2.
3.
Seller
Buyer
*Cash – A/R
✓ Freight In – A/P
*Cash
✓ Freight In
= no entry
*Cash
✓ Freight Out
= no entry
*Cash – A/R
✓ Freight Out – A/P
Note: Accounts Payable of seller to buyer can be offset using
the accounts receivable of seller from buyer.

A/R less A/P = new A/R value.
ALLOWANCE FOR SALES RETURNS AND ALLOWANCES
1.
ASSUMPTIONS
Event happened
2.
Estimates
ENTRY
Dr. Sales
Cr. A/R
Dr. Sales Returns and Allowances
Cr. Allowance for Sales Return
ALLOWANCE FOR SALES DISCOUNT
CASH DISCOUNT

Only for credit transactions

Incentive for early payment

Reduction of invoice price
TRADE DISCOUNT

For cash/credit

Incentives for volumes/bulk

Directly reduces list prices
3.
1.
ASSUMPTIONS
Event happened
2.
Estimates
ALLOWANCE FOR DOUBTFUL ACCOUNTS
DEBIT
JOURNALIZE
ALLOWANCE
DIRECT
METHOD
WRITE-OFF
CREDIT
1.
BEGINNING BALANCE (not required allowance)
2.
PROVISION (worthless accounts)
Methods of
Estimating
Uncollectibles
% of Revenue
1.
ENTRY
Check with Credit Sales whether the stated problem is
Gross Method (common) or Net Method.
Dr. Sales Returns and Allowances
Cr. Allowance for Sales Return
Formula
Rate of Uncollectible x
Revenue
Result
Bad Debt
Expense
WRITE-OFF
Dr. A/R
Cr. Allowance for DA
Dr. Cash
Cr. A/R
Dr. Doubtful Accounts
No entry
Cr. Allowance for
DA
3. RECOVERY
ALLOWANCE, END OR REQUIRED ALLOWANCE
Methods of
Estimating
Uncollectibles
% of A/R
Receivable
Aging of
Receivables
4.
Formula
Rate of Uncollectible x
A/R
Rate of Uncollectible
according to days of (1)
current due or (2) past
due
Dr. Allowance for DA
Cr. A/R
Result
Allowance,
END or
Required
Allowance
Allowance,
END or
required
allowance
(note: this is when
accounts are only
considered to be
doubtful of collection
and not worthless
RECOVERY
5.
WRITE-OFFS
FINAL AMOUNT OR SUBSEQUENT VALUATION = net realizable value or the amortized cost.
NOTES RECEIVABLE
1.
DEBIT
INITIAL VALUATION = present value (common)
N/R
SHORT-TERM
LONG-TERM
CREDIT
1.
DISHONORED NOTES
2.
PRINCIPAL PAYMENT
3.
REDUCTION FOR IMPAIRMENT OR UNCOLLECTIBILITY
INTEREST-BEARING
NON-INTEREST BEARING
Face amount/face value
Face amount/value upon
Present Value/the discounted
issuance
value of future cash flows using
the effective interest rate.
FINAL AMOUNT OR SUBSEQUENT MEASUREMENT = amortized cost using the effective interest
method.
LONG-TERM NON-INTEREST BEARING
Present Value
Add: Amortization of the Discount/Face Amount
Less: Unamortized Unearned Interest
Total: Amortized Cost