1. Animal Care center
Butterfield, John D
Citrus Groves, Inc.
Dairy Fresh Farms
Eastlake Stables
Other Customers
Totals
Analysis of accounts receivable by age
December 31, 2001
Not
1-30
31-60
Yet
Days
Days
Total
Due
Past Due
Past Due
$
$
$
$
9,000
9,000
2,400
2,400
4,000
3,000
1,000
1,600
13,000
7,000
6,000
70,000
32,000
22,000
9,600
100,000 32,000
29,000
12,000
31-60
Days
Past Due
$
Over 90
Days
Past Due
$
600
1,000
2,400
3,000
4,000
5,000
Estimated Uncollectible Accounts Receivable
December 31, 2001
Age group
% age considered
total
uncollectable
Not yet due
1-30 days past due
31-60 days past due
61-90 days past due
Over 90 days past due
Total
51,000
29,000
12,000
3,000
5,000
100,000
0.01
0.03
0.10
0.20
0.50
An Alternative approach to estimating credit losses
The income statement approach
No:
Particular
1. Uncollectible accounts expense
Allowance for doubtful accounts
(150,000 X 0.02 =3,000)
To record uncollectible accounts expense, estimated at
2% of credit sales.
Conservatism in the valuation of accounts receivable
Direct Write – off method
2. Uncollectible accounts expense
Accounts receivable
To write off the receivable from Bell Products as
uncollectable.
Income tax regulations and financial reporting
Internal controls for receivables
Management of accounts receivable
Factoring accounts receivable
credit card sales
Debit
$
3,000
Estimated
uncollectible
accounts
510
870
1,200
600
2,500
5,680
Credit
$
3,000
250
250

2. Bank credit cards
Other credit cards
3. Accounts receivable
Sales
To record sale to customer using quick charge credit card
4. Cash
Credit card discount expense
Account receivable
To record collection of account receivable from Quick
charge Co., less 5 % discount.
Evaluating the quality of accounts receivable
200
200
1.140
60
Accounts receivable turnover
=
=
=
=
Net sales
Average Accounts receivable
$ 9.4
($ 1.6 + $ 1.4)
$ 9.4
$ 1.5
6.3 times
Average number of days to collect accounts receivable
=
=
=
Days in year
Account receivable turnover
365
6.3
58 days
1.200