ACCT 211 March 3 Notes

Accounts Receivable

oA receivable is an amount due from another party.

oA company must also maintain a separate account (called a subsidiary ledger) for

each customer that tracks how much that customer purchases,…

Sales on Credit

Credit Card Sales

oMany stores search for any competitive advantage.

oCustomer’s credit is evaluated by the credit card issuer.

oSales increase by providing purchase options to the customer.

oThe risks of extending credit are transferred to the credit card issuer.

oCash collections are quicker.

oSome credit card companies require the store to remit the credit card sales receipts

electronically and wait for the cash payment.

oIf TechCom must remit the credit card sales receipts and wait for the cash

payment, there will be two journal entries…

One entry is made on the date of the sale

The second is made when the cash is received

Installment Accounts Receivable

oAmounts owed by customers from credit sales for which payment is required in

periodic amounts over and extended time period such as purchasing a car.

oFord Motor Company repots more than $70 billion in installment receivable.

Valuing Accounts Receivable

oSome customers may not pay their account. Uncollectible amounts are referred to

as bad debts.

oThere are two methods of accounting for bad debts:

Direct Write-Off Method

Allowance Method

oNotice that the specific customer’s name is included