7: In a Set of Financial Statements, What Information Is Conveyed about Receivables?
- Page ID
- 24740
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 7.1: Accounts Receivable and Net Realizable Value
- This page discusses the reporting of accounts receivable in financial accounting, focusing on their recording at net realizable value, which accounts for potential uncollectible accounts. It emphasizes the uncertainties in these estimations and the necessity of compliance with U.S. GAAP for accurate reporting. Company officials utilize various methods, including historical data and current trends, to ensure reasonable assurances about figures.
- 7.2: Accounting for Uncollectible Accounts
- This page highlights key learning objectives about bad debt expenses and accounts receivable reporting under U.S. GAAP. It discusses the creation of an allowance for doubtful accounts to represent anticipated uncollectibles, ensuring receivables are shown at net realizable value. Bad debt expenses must align with sales timing per the matching principle, leading to necessary adjusting entries for accurate financial statements and clearer receivable presentations.
- 7.3: The Problem with Estimations
- This page discusses the complexities of accounting for receivables and doubtful accounts, emphasizing that while changes in estimations affect future financial statements, past figures remain unchanged if initially reasonable. It highlights the balance of estimation discrepancies and the prioritization of timely reporting over absolute accuracy.
- 7.4: Estimating the Amount of Uncollectible Accounts
- This page discusses the significance of subsidiary ledgers in accounting for tracking customer balances, inventory, and accounts payable. It emphasizes the need for accuracy between subsidiary and general ledgers, a challenge mitigated by electronic systems.
- 7.5: Remeasuring Foreign Currency Balances
- This page emphasizes the importance for students to grasp foreign currency transactions and the necessity to convert them into a company's functional currency for accurate financial reporting. It highlights challenges posed by fluctuating exchange rates, distinguishing between historical rates for non-monetary items and current rates for monetary assets and liabilities. According to U.S.
- 7.6: A Company’s Vital Signs—Accounts Receivable
- This page covers the calculation of the current ratio and working capital, highlighting their significance in analyzing accounts receivable efficiency and financial health. It emphasizes monitoring key indicators like the age of receivables to evaluate cash collection speed. Strategies for reducing collection time include assessing creditworthiness, improving billing efficiency, offering discounts for early payments, and enforcing stricter collection policies.
- 7.7: End-of-Chapter Exercises
- This page presents questions and problems related to accounts receivable and financial reporting, including definitions and estimation methods for uncollectible accounts. It emphasizes the importance of accurate financial reporting and discusses challenges in foreign currency transactions.