美文网首页会计学原理
会计学原理-笔记-Chapter 6

会计学原理-笔记-Chapter 6

作者: 是Sophia呀 | 来源:发表于2018-12-01 09:56 被阅读0次

    Accounting For Sales (Selling products or services)


    A. Sales

    Recognition of Revenue:

    1. Revenue recognition principle

    Revenue should be recognized when earned and realized

    Earned: The work (providing goods or services) has been substantially completed.

    Realized:Cash, or a valid promise of future payment, has been received.

    2. 5 steps for revenue recognition

        Identify contract with customer

        Identify its separate performance obligations

        Determine the transaction price

        Allocate transaction price to the separate performance obligations

        Recognize revenue when entity satisfies a performance obligation

    3. Revenue Recognition Method

    a. Percentage of completion method

    Recognizing revenue on long-term contracts as production occurs

        Does not require waiting until the final product is delivered

        Associated expenses must be recognized by the company

     Used when:

        There is surety of receiving payment 

        Progress measures are dependable 

        Contract obligations are explicit

    b. Completed contract method

    Recognizing revenue on long-term contracts that delays recognition of both revenue and related expenses until completion of the contract

    Used when:

        there is uncertainty about customers paying at end of contract (U.S. GAAP)

        the outcome of a contract cannot be estimated reliably (IRFS)

    4. Typical Line of business about sale

    Negotiation -> Contract -> Collect Cash -> Deliver Product -> Continuing Service

            OR

    Deliver Product -> Collect Cash (Cash Discount?) -> Customer Return -> Bad Debt -> Continuing Service

    Measurement of Sales

    1. Gross Sales and Net Sales

    Gross Sales: initial revenues or asset inflows based on the initial sales price

    Net sales: Total amount of sales after deducting returns, allowances, and discounts

    2. Sales Return and Allowances

    sales return occurs when a customer returns previously purchased merchandise

    sales allowance is a reduction of the original selling price

    A contra account (Sales Returns and Allowances) combines both returns and allowances in a single account

    Contra revenue account

    • Used instead of reducing the revenue account directly

    • Combines both returns and allowances

    • Helps monitor changes in the level of returns and allowances

    • Helps in forecasting demand and managing inventory

    Dr. Sales Returns and Allowances

        Cr. Accounts Receivable (or Cash)

    3. Sales Discount

    Sale discounts are rewards for prompt payment

    Credit Terms: 

        p/n, x/m

    p=discount percentage

    n= # of days in discount period

    x=otherwise, the full amount is due

    m=maximum days in credit period

    Discount is a reduction in the full price due to either a sale, promotion or prompt payment

    Trade discounts offer one or more reductions to the gross selling price for a particular class of customers

    The Gross sales is the price received after deducting the trade discount

    There is no contra account for trade discount

    Dr. Cash

          Cash discounts on sales

        Cr. Accounts Receivable

    4. Credit Card Discount

    Credit Card Fees: typically 1%  4% of gross sales

    • An alternative to sales discount

    • Deduct from gross sales directly

    • Or Record as credit card discount

    Dr. Cash

          Credit Card Discount

        Cr. Sales

    5. Reporting for Net Sales Revenue



    B. Bad Debts

    Record:

    1. Classification of Receivables

    Accounts Receivable, Notes Receivable, Interest Receivable, Dividends receivable, Other Receivables

    2. Uncollectible Accounts of A/Rs

    Occur when customers do not pay for items or services purchased on credit

    When an account receivable becomes uncollectible, a firm incurs a bad-debt expense

    3. The Direct Write-off Method

    journal entries:

    when credit sales are made:

    Dr. Accounts Receivable 

        Cr. Sales Revenue

    when an A/R becomes uncollectible:

    Dr. Bad Debt Expense

        Cr. Accounts Receivable

    when cash received on the previously bad account:

    Dr. Accounts Receivable

        Cr. Bad Debt Expense

    Dr. Cash

        Cr. Accounts Receivable

    Method is objective because bad debt expense is written off at the time it proves to be uncollectible.

    This method is not consistent with the matching principle(All costs and expenses in generating revenues must be identified with those revenues period by period).

    4. The Allowance Method

    The firm estimates the amount of sales that will ultimately be uncollectible in the same period in which those credit sales are made.

    A contra asset account(allowance for bad debts, or, Allowance for doubtful accounts坏帐准备) is set up and deducted from the A/R account on the BS.

    journal entries:

    when credit sales are made:

    Dr. Accounts Receivable

        Cr. Sales Revenue

    Bad debts are estimated and recognized in the same period as credit sales are made:

    Dr. Bad Debt Expense

        Cr. Allowance for Bad Debts

    when actually write off a bad account:

    Dr. Allowance for Bad Debts

        Cr.  Accounts Receivable

    when credit customers eventually pay:

    The Allowance Method: Reversing Written-off Receivables

    Dr. Accounts Receivable

        Cr. Allowance for Bad Debts

    Dr. Cash

        Cr. Accounts Receivable 

    Estimate:

    1. As a Percentage of Credit Sales  (matching+IS focus)

    Amount of uncollectibles=a straight percentage of the current year’s credit sales.

    Based on experience of prior years, modified for changes expected in current year.

    Any existing balance in Allowance for Bad Debts is not considered

    2. As a Percentage of Total Receivables  (realizable+BS focus)

    Amount of uncollectibles = a percentage of total receivables balance at period’s end.

    Focus is on estimating total bad debts existing at the end of the period.

    The ending balance in Allowance for Bad Debts is the amount of total receivables estimated to be uncollectible.

    3. Aging Accounts Receivable  (realizable+BS focus)

    A more refined version of % of total receivable method.

    Based on how long receivables have been outstanding to estimate the ending balance in the Allowance for Bad Debts.

    Each receivable is categorized according to age, such as

    Current

    1-30 days past due

    31-60 days past due, etc.

    The total amount in each classification is multiplied by an appropriate uncollectible percentage



    C. Analyze and management of Accounts Receivable

    Assessing Management of Receivables

    1. Accounts Receivable Turnover    应收帐款周转率

    Accounts Receivable Turnover=Credit Sales/Average Accounts Receivable

    Credit Sales=Net Sales on Account

    Average Accounts Receivable=(Beginning of the year+End of the year)/2

    为什么这是一个有效的衡量指标?

    Determines the number of times during a year a company is “turning over” or collecting its receivables.

    Measure of how many times old receivables are collected and replaced by new receivables.

    2. The Days to Collect A/Rs (Average collection period, 应收账款平均收账期)

    Average Collection Period=365 days/Accounts Receivable Turnover

    Converts A/Rs turnover into the number of days it takes to collect receivables.

    For each dollar revenue, how long it takes the firm to collect the cash.

    Balancing the desire to extend credit in order to increase sales with the need to collect cash quickly to pay the company’s bills.

    3. Earning Manipulation through Bad Debt Expense

    Overestimate:

        Years incurring huge loss

        CEO turnover - big bath

        Merger & Acquisition 

        Outside Negative forces

    Underestimate:

        Loss Aversion

        Earnings growth


    D. Cash Management & Internal Control

    1. What is Internal Control?

    a. Internal Control is an organizational plan and the designed to accomplish the following:

    Safeguard assets

    Encourage employees to follow company policies

    Promote operational efficiency related measures 

    Ensure accurate, reliable accounting records

    b. Checklist of internal control:

    Reliable personnel with clear responsibilities

    Separation of duties makes it harder to collude 

    Adequate documentation (source documents) 

    Proper authorization for normal/abnormal transactions

    Well-documented policies and procedures

    Physical safeguards over items of value

    Vacations and rotation of duties

    Independent review of all systems

    Cost-benefit considerations should apply

    2. Internal Control of Cash

    Bank Reconciliations    Daily Deposits    Purchase Approval    Payment Approval 

    Check Signatures    Pre-numbered Checks

    Internal Control of Cash Receipts:

    A mail room employee opens all mail and records the checks on a remittance advice.

    The Treasurer is responsible for depositing the checks, documented with a deposit receipt.

    The remittance advice goes the Accounting Department where is it recorded.

    The Controller’s office matches the remittance advice and the deposit receipt.

    Controls Over Cash Payments:

    Bills are only approved for payment by the accounting department when all the documents related to the transaction are matched together.

    A payment voucher authorizes a check to be sent to the vendor.

    Bank Reconciliation:

    A mathematical explanation of the difference between two numbers.

    With a bank reconciliation, there is often a difference between the bank statement balance and the general ledger cash balance.

    Process A:

    Start with the Bank Balance at the end of the period

    + Add Deposits-in-Transit (DIT)

    Cash you have collected from customers, but which has not yet been deposited

    - Deduct Outstanding Checks (O/S Checks)

    Include ALL uncleared checks, even from previous periods

    Adjust for bank errors

    = Adjusted Bank Balance

    Process B:

    Start with the Book Balance at the end of the period

    + Add Bank Collections, Interest Revenue, and EFT Receipts

    (Cash receipts not already on the books)

    -Deduct Services Charges, NSF Checks, and EFT Payments

    (Cash payments not already on the books)

    Adjust for book errors

    = Adjusted Book Balance 

    相关文章

      网友评论

        本文标题:会计学原理-笔记-Chapter 6

        本文链接:https://www.haomeiwen.com/subject/khtpqqtx.html