ACCT

• Revenue be recorded when earned:
• Goods or service has been delivered
• Amount of customer payments known
• Collection is reasonably assured

• For sellers of goods, sales revenue is recorded when title and risks of ownership transfer to the buyer.
• Title changes hands at shipment, and buyer normally pays shipping.
• Revenue recognized at shipment.

• Title changes hands on delivery, and seller normally pays for shipping.
• Revenues recognized at delivery.

• 1.To increase sales.
• 2.To avoid providing credit directly to customers.
• 3.To avoid losses due to bad checks.
• 4.To avoid losses due to fraudulent credit card sales.
• 5.To receive payment quicker.

• 2: Discount Percent
• 10: Number of days in discount period
• n: Total sales less returns (net)
• 30: Maximum credit period

• Amount Saved
• Amount Paid

• Reduction of sales revenues for return of or allowances for unsatisfactory goods.
• Contra Revenue Account (XR)
• Debit Damaged
• Debit Returned
• Increases on Debit
• Credit Card Discounts and Sales Discount separate accounts
• Both (XR) though

• Sales Revenue
• Less: Credit Card Discounts
• Sales Discounts
• Sales Returns and Allowances
• Net Sales

• Gross Profit / Net Sales
• Measures a company's ability to charge premium prices and produce goods and services at low cost.
• Higher gross profit results higher net income.

• Created by a credit sale on an open account.
• Trade receivables: are amounts owed to the business for credit sales of goods, or
• services. Normal course of business when a sale of merchandise or services on credit occurs.
• Nontrade receivables: are amounts owed to the business for other than business
• transactions.

• Promise in writing to pay:
• 1) specified amount of money called the principal, at a definite future date known as the maturity date
• 2) specified amount of interest at one or more future dates.
• Interest is the amount charged for use of the principal.

Bases bad debt expense on an estimate of uncollectible accounts.

• Expense associated with estimated uncollectible accounts receivable
• Adjusting journal entry at end of accounting period records the bad debt estimate.
• Example:
• Bad Debt expense.....................(Dedit)
• Allowance for doubtful accounts (XA)................(Credit)

• When you know they will not pay:
• Allowance for Doubtful Accounts (XA)......(Debit)
• Accounts Receivable.............................................................(Credit)

• Credit sales X bad debt loss rate = bad debt expense
• Gets recorded directly as bad debt expense and an increase in allowance fore doubtful accounts.

• Estimates based on the age of each account.
• Amount given represents TOTAL estimated uncollectible accounts.
• In order to get the adjusting entry, take DESIRED balance - balance already in Allowance for doubtful accounts.
• This will total your adjusting entry.

• Receivables Turnover= Net sales/ Average net Trade Accounts receivable
• Measures how many times average receivables are recorded and collected for the year.
• Higher the ratio, the faster the collection of receivables.

Money or any instrument the banks will accept for deposit and immediate credit to a company's account.

Investment with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change.

Monthly report from a bank that shows deposits recorded, checks cleared, other debits and credits, and a running bank balance.

• Process of comparing the ending cash balance in the company's records and the ending cash balance reported by the bank on the monthly bank statement.
• Two sides to it: Book side and Bank side
• Balance per bank + Deposits in transit - Outstanding checks +/- Bank errors.
• Balance per Book + Interest paid by bank - NSF/Service charge +/- Company errors
• 1. Identify Outstanding checks: (compare the list of canceled checks on the bank statement with the record of checks maintained by the company. )
• 2. Identify deposits in Transit: comparing the deposit slips on hand with those listed on the bank statement.
• 3. Bank charges: NSF, Interest received
• 4. Determine error impact: look at checks.

ALL RECONCILING ITEMS ON THE BOOK SIDE REQUIRE AN ADJUSTING ENTRY TO THE CASH ACCOUNT.