Chapter 4 Financial Accounting IFRS edition

Penyajian laporan keuangan entitas berorientasi non laba disusun dengan memperhatikan persyartan, struktur laporan dan persyaratan minimal yang diatur dalam PSAK 1. (par 09)
Entitas berorientasi non laba dapat membuat penyesuaian deskripsi yang digunakan untuk beberapa pos dalam laporan keuangan. Misal: pembatasan sumber daya (par 10)
Entitas berorientasi non laba dapat membuat penyesuaian deskripsi yang digunakan atas laporan keuangan. Misal Judul laporan perubahan aset neto untuk mencerminkan fungsi yang lebih sesuai dengan isi laporan keuangan. (par 11)
Entitas berorientasi nonlaba tetap mempertimbangkan seluruh fakta dan keadaan dalam menyajikan laporan keuangan termasuk catatan atas LK, sehingga tidak mempengaruhi kualitas informasi yang disajikan dalam LK.

1. Slide
8-1

2. Slide
8-2
Chapter 8
Accounting for Accounting for
ReceivablesReceivables
Financial Accounting, IFRS Edition
Weygandt Kimmel Kieso

3. Slide
8-3
1.Identify the different types of receivables.
2.Explain how companies recognize accounts receivable.
3.Distinguish between the methods and bases companies use to
value accounts receivable.
4.Describe the entries to record the disposition of accounts
receivable.
5.Compute the maturity date of and interest on notes receivable.
6.Explain how companies recognize notes receivable.
7.Describe how companies value notes receivable.
8.Describe the entries to record the disposition of notes receivable.
9.Explain the statement presentation and analysis of receivables.
Study ObjectivesStudy Objectives

4. Slide
8-4
Types of Types of
ReceivablesReceivables
Accounts Accounts
receivablereceivable
Notes receivableNotes receivable
Other Other
receivablesreceivables
Accounts Accounts
ReceivableReceivable
Notes ReceivableNotes Receivable
Statement Statement
Presentation and Presentation and
AnalysisAnalysis
PresentationPresentation
AnalysisAnalysis
Determining Determining
maturity datematurity date
Computing Computing
interestinterest
Recognizing Recognizing
notes receivablenotes receivable
Valuing notes Valuing notes
receivablereceivable
Disposing of Disposing of
notes receivablenotes receivable
Recognizing Recognizing
accounts accounts
receivablereceivable
Valuing accounts Valuing accounts
receivablereceivable
Disposing of Disposing of
accounts accounts
receivablereceivable
Accounting for ReceivablesAccounting for Receivables

5. Slide
8-5
Amounts due from individuals and other companies that
are expected to be collected in cash.
Amounts owed by
customers that
result from the sale
of goods and
services.
Accounts Accounts
ReceivableReceivable
Types of ReceivablesTypes of Receivables
SO 1 Identify the different types of receivables.SO 1 Identify the different types of receivables.
Claims for which
formal instruments
of credit are issued
as proof of debt.
“Nontrade” (interest,
loans to officers,
advances to
employees, and
income taxes
refundable).
Notes Notes
ReceivableReceivable
Other Other
ReceivablesReceivables

6. Slide
8-6
Three accounting issues:
1.Recognizing accounts receivable.
2.Valuing accounts receivable.
3.Disposing of accounts receivable.
Accounts ReceivableAccounts Receivable
SO 1 Identify the different types of receivables.SO 1 Identify the different types of receivables.
The following exercise was illustrated in Chapter 5. For
simplicity, inventory and cost of goods sold have been
omitted.
Recognizing Accounts Receivable

7. Slide
8-7
Illustration: Assume that Jordache Co. on July 1, 2011, sells
merchandise on account to Polo Company for $1,000 terms 2/10,
n/30. Prepare the journal entry to record this transaction on the
books of Jordache Co.
Accounts receivable 1,000Jul. 1
Sales
1,000
SO 2 Explain how companies recognize accounts receivable.SO 2 Explain how companies recognize accounts receivable.
Recognizing Accounts ReceivableRecognizing Accounts Receivable

8. Slide
8-8
Illustration: On July 5, Polo returns merchandise worth $100 to
Jordache Co.
Sales returns and allowances100Jul. 5
Accounts receivable
100
SO 2 Explain how companies recognize accounts receivable.SO 2 Explain how companies recognize accounts receivable.
Recognizing Accounts ReceivableRecognizing Accounts Receivable
Illustration: On July 11, Jordache receives payment from
Polo Company for the balance due.
Cash 882Jul. 11
Sales discounts ($900 x .02) 18
Accounts receivable
900

9. Slide
8-9
Valuing Accounts Receivables
Reported as an asset on the statement of financial
position.
Reported at the amount the company thinks they will be
able to collect.
Sales on account raise the possibility of accounts not
being collected.
Valuation can be difficult because an unknown amount
of receivables will become uncollectible.
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Accounts ReceivableAccounts Receivable

10. Slide
8-10
Allowance MethodAllowance Method
Losses are estimated:
better matching.
receivable stated at net
realizable value.
required by IFRS.
Methods of Accounting for Uncollectible Accounts
Direct Write-OffDirect Write-Off
Theoretically undesirable:
no matching.
receivable not stated at net
realizable value.
not acceptable for financial
reporting.
Valuing Accounts ReceivableValuing Accounts Receivable
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.

11. Slide
8-11
Valuing Accounts ReceivableValuing Accounts Receivable
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Under the direct write-off method, when a company determines
a particular account to be uncollectible, it charges the loss to Bad
Debts Expense. Assume, for example, that on December 12
Warden Co. writes off as uncollectible M. E. Doran’s $200
balance. The entry is:
Bad debt expense 200Dec. 12
Accounts receivable
200
Direct Write-Off Method for Uncollectible Accounts

12. Slide
8-12
Valuing Accounts ReceivableValuing Accounts Receivable
Allowance Method for Uncollectible Accounts
1.Companies estimate uncollectible accounts receivable.
2.To record estimated uncollectibles:
Bad Debts Expense xxx
Allowance for Doubtful Accounts
xxx
3.To write off uncollectible accounts:
Allowance for Doubtful Accounts xxx
Accounts Receivable
xxx
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.

13. Slide
8-13
Valuing Accounts ReceivableValuing Accounts Receivable
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Recording Estimated Uncollectibles: Assume that Hampson
Furniture has credit sales of $1,200,000 in 2011. Of this amount,
$200,000 remains uncollected at December 31. The credit
manager estimates that $12,000 of these sales will be
uncollectible. The adjusting entry to record the estimated
uncollectibles is:
Bad debt expense 12,000Dec. 31
Allowance for doubtful accounts
12,000

14. Slide
8-14
Valuing Accounts ReceivableValuing Accounts Receivable
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Illustration 8-2
Presentation of allowance for doubtful accounts

15. Slide
8-15
Valuing Accounts ReceivableValuing Accounts Receivable
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Recording the Write-Off of an Uncollectible Account:
The financial vice-president of Hampson Furniture authorizes a
write-off of the $500 balance owed by R.A.Ware
on March 1, 2012. The entry to record the write-off is:
Allowance for doubtful accounts 500Mar. 1
Accounts receivable
500
Illustration 8-3

16. Slide
8-16
Valuing Accounts ReceivableValuing Accounts Receivable
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Recording the Write-Off of an Uncollectible Account:
The write-off affects only statement of financial position accounts.
Illustration 8-3
Illustration 8-4

17. Slide
8-17
Accounts receivable
500
Valuing Accounts ReceivableValuing Accounts Receivable
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Recovery of an Uncollectible Account: On July 1, R. A. Ware
pays the $500 amount that Hampson had written off on March 1.
These are the entries:
Accounts receivable 500Jul. 1
Allowance for doubtful accounts
500
Cash 500Jul. 1

18. Slide
8-18
Bases Used for Allowance Method
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Valuing Accounts ReceivableValuing Accounts Receivable
Illustration 8-5

19. Slide
8-19
Illustration: Assume that Gonzalez Company elects to use
the percentage-of-sales basis. It concludes that 1% of net credit
sales will become uncollectible. If net credit sales for 2011 are
$800,000, the adjusting entry is:
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Valuing Accounts ReceivableValuing Accounts Receivable
Bad debts expense 8,000Dec. 31
Allowance for doubtful accounts
8,000
Percentage-of-Sales
* $800,000 x 1%
*

20. Slide
8-20
Emphasizes the matching of expenses with revenues.
When the company makes the adjusting entry, it disregards
the existing balance in Allowance for Doubtful Accounts.
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Valuing Accounts ReceivableValuing Accounts Receivable
Percentage-of-Sales
Illustration 8-6

21. Slide
8-21
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Valuing Accounts ReceivableValuing Accounts Receivable
Percentage-of-Receivables
Illustration 8-7
Aging schedule

22. Slide
8-22
Illustration: If the trial balance shows Allowance for Doubtful
Accounts with a credit balance of $528, the company will make the
following adjusting entry.
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Valuing Accounts ReceivableValuing Accounts Receivable
Bad debts expense 1,700Dec. 31
Allowance for doubtful accounts
1,700
Percentage-of-Receivables
* $2,228 - 528
*

23. Slide
8-23
Occasionally the allowance account will have a debit balance
prior to adjustment.
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Valuing Accounts ReceivableValuing Accounts Receivable
Illustration 8-8
Percentage-of-Receivables

24. Slide
8-24
SO 3 Distinguish between the methods and bases SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.companies use to value accounts receivable.
Percentage of Sales approach:
Summary
Focus on “Bad debt expense” estimate, existing balance
in the allowance account is ignored for journal entry.
Method achieves a matching of expense and revenues.
Percentage of Receivables approach:
Accurate valuation of receivables on the statement of
financial position.
Method may also be applied using an aging schedule.
Balance in allowance account considered for journal entry.
Valuing Accounts ReceivableValuing Accounts Receivable

25. Slide
8-25
Answer on notes page

26. Slide
8-26
Companies sell receivables for two major reasons.
1.Receivables may be the only reasonable source of cash.
2.Billing and collection are often time-consuming and costly.
SO 4 Describe the entries to record the disposition of accounts receivable.SO 4 Describe the entries to record the disposition of accounts receivable.
Accounts ReceivableAccounts Receivable
Disposing of Accounts Receivable

27. Slide
8-27
SO 4 Describe the entries to record the disposition of accounts receivable.SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts ReceivableDisposing of Accounts Receivable
Sale of Receivables
Factor
Buys receivables from businesses and then collects
the payments directly from the customers.
Typically charges a commission to the company that
is selling the receivables.
Fee ranges from 1-3% of the amount of receivables
purchased.

28. Slide
8-28
Illustration: Illustration: AAssume that Hendredon Furniture factors
$600,000 of receivables to Federal Factors. Federal Factors
assesses a service charge of 2% of the amount of receivables
sold. The journal entry to record the sale by Hendredon Furniture
is as follows.
SO 4 Describe the entries to record the disposition of accounts receivable.SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts ReceivableDisposing of Accounts Receivable
Accounts receivable
600,000
Cash 588,000
Service charge expense 12,000
($600,000 x 2% = $12,000)

29. Slide
8-29 Answer on notes page

30. Slide
8-30
SO 4 Describe the entries to record the disposition of accounts receivable.SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts ReceivableDisposing of Accounts Receivable
Credit Card Sales
Retailer considers credit card sales the same as cash
sales.
Retailer must pay card issuer a fee of 2 to 4% for
processing the transactions.
Retailer records sale in a similar manner as checks
deposited from cash sale.

31. Slide
8-31
SO 4 Describe the entries to record the disposition of accounts receivable.SO 4 Describe the entries to record the disposition of accounts receivable.
Credit Card SalesCredit Card Sales
Illustration: Illustration: Anita Ferreri purchases $1,000 of compact discs
for her restaurant from Karen Kerr Music Co., using her Visa
First Bank Card. First Bank charges a service fee of 3%. The
entry to record this transaction by Karen Kerr Music is as follows.
Sales
1,000
Cash 970
Service charge expense 30

32. Slide
8-32
SO 5 Compute the maturity date of and interest on notes receivable.SO 5 Compute the maturity date of and interest on notes receivable.
Notes ReceivableNotes Receivable
A promissory note is a written promise to pay a specified
amount of money on demand or at a definite time.
Promissory notes may be used:
1.when individuals and companies lend or borrow money,
2.when amount of transaction and credit period exceed
normal limits, or
3.in settlement of accounts receivable.

33. Slide
8-33
SO 5 Compute the maturity date of and interest on notes receivable.SO 5 Compute the maturity date of and interest on notes receivable.
Notes ReceivableNotes Receivable
To the Payee, the promissory note is a note receivable.
To the Maker, the promissory note is a note payable.
Illustration 8-10

34. Slide
8-34
Determining the Maturity Date
SO 5 Compute the maturity date of and interest on notes receivable.SO 5 Compute the maturity date of and interest on notes receivable.
Notes ReceivableNotes Receivable
Note expressed in terms of
Months
Days
Illustration 8-12

35. Slide
8-35
Illustration 8-14
Determining the Maturity Date
Illustration 8-13
SO 5 Compute the maturity date of and interest on notes receivable.SO 5 Compute the maturity date of and interest on notes receivable.
Notes ReceivableNotes Receivable

36. Slide
8-36
SO 6 Explain how companies recognize notes receivable.SO 6 Explain how companies recognize notes receivable.
Illustration: Illustration: Calhoun Company wrote $1,000, two-month, 12%
promissory note to settle an open account, Wilma Company
makes the following entry for the receipt of the note.
Notes receivable 1,000
Accounts receivable 1,000
Recognizing Notes Receivable
Notes ReceivableNotes Receivable

37. Slide
8-37
Valuing Notes Receivable
SO 7 Describe how companies value notes receivable.SO 7 Describe how companies value notes receivable.
Notes ReceivableNotes Receivable
Like accounts receivable, companies report short-term
notes receivable at their cash (net) realizable value.
Estimation of cash realizable value and bad debts
expense are done similarly to accounts receivable.
Allowance for Doubtful Accounts is used.

38. Slide
8-38
Disposing of Notes Receivable
SO 8 Describe the entries to record the disposition of notes receivable.SO 8 Describe the entries to record the disposition of notes receivable.
Notes ReceivableNotes Receivable
1.Notes may be held to their maturity date.
2.Maker may default and payee must make an
adjustment to the account.
3.Holder speeds up conversion to cash by selling the
note receivable.

39. Slide
8-39
Honor of Notes Receivable
SO 8 Describe the entries to record the disposition of notes receivable.SO 8 Describe the entries to record the disposition of notes receivable.
Notes ReceivableNotes Receivable
A note is honored when its maker pays it in full at its
maturity date.
Dishonor of Notes Receivable
A dishonored note is not paid in full at maturity.
A dishonored note receivable is no longer negotiable.
Disposing of Notes Receivable

40. Slide
8-40
Notes ReceivableNotes Receivable
SO 8 Describe the entries to record the disposition of notes receivable.SO 8 Describe the entries to record the disposition of notes receivable.
Illustration: Betty Co. lends Wayne Higley Inc. $10,000 on June
1, accepting a five-month, 9% interest-bearing note. Assuming
that Betty Co. presents the note to Wayne Higley Inc. on the
maturity date, Betty Co.’s entry to record the collection is:
Cash 10,375Nov. 1
Notes receivable 10,000
Honor of Notes Receivables
Interest revenue 375

41. Slide
8-41
Notes ReceivableNotes Receivable
SO 8 Describe the entries to record the disposition of notes receivable.SO 8 Describe the entries to record the disposition of notes receivable.
Illustration: If Betty Co. prepares financial statements as of
September 30, it must accrue interest. Betty Co. would make an
adjusting entry as follows.
Interest receivable 300Sept. 30
Interest revenue 300
Honor of Notes Receivables

42. Slide
8-42
Notes ReceivableNotes Receivable
SO 8 Describe the entries to record the disposition of notes receivable.SO 8 Describe the entries to record the disposition of notes receivable.
Illustration: The entry by Betty Co. to record the honoring of the
Wayne Higley Inc. note on November 1 is:
Cash 10,375Nov. 1
Notes receivable 10,000
Honor of Notes Receivables
Interest receivable 300
Interest revenue 75

43. Slide
8-43
Illustration: Wayne Higley Inc. on November 1 indicates that it
cannot pay at the present time. If Betty Co. does expect eventual
collection, it would make the following entry at the time the note is
dishonored (assuming no previous accrual of interest).
Notes ReceivableNotes Receivable
SO 8 Describe the entries to record the disposition of notes receivable.SO 8 Describe the entries to record the disposition of notes receivable.
Accounts receivable 10,375Nov. 1
Notes receivable 10,000
Dishonor of Notes Receivables
Interest revenue 375

44. Slide
8-44
Presentation
SO 9 Explain the statement presentation and analysis of receivables.SO 9 Explain the statement presentation and analysis of receivables.
Statement Presentation and AnalysisStatement Presentation and Analysis
Identify in the statement of financial position or in the
notes each major type of receivable.
Report short-term receivables appear in current assets.
Report both gross amount of receivables and allowance
for doubtful account.
Report bad debts expense and service charge expense
as selling expenses.
Report interest revenue under “Other” in the
nonoperating section.
F/P
I/S

45. Slide
8-45
Analysis
This Ratio used to:
Assess the liquidity of the receivables.
Measure the number of times, on average, a company
collects receivables during the period.
SO 9 Explain the statement presentation and analysis of receivables.SO 9 Explain the statement presentation and analysis of receivables.
Statement Presentation and AnalysisStatement Presentation and Analysis
Illustration 8-15

46. Slide
8-46
Average collection period in terms of days.
Used to assess effectiveness of credit and collection
policies.
Collection period should not exceed credit term period.
SO 9 Explain the statement presentation and analysis of receivables.SO 9 Explain the statement presentation and analysis of receivables.
Statement Presentation and AnalysisStatement Presentation and Analysis
Analysis
Illustration 8-16

47. Slide
8-47
IFRS has four specifically defined categories for financial
assets, which include loans and receivables. GAAP does not
designate a similar category for loans and receivables.
GAAP and IFRS account for bad debts in a similar fashion.
Both account for short-term receivables at amortized cost,
adjusted for allowances for doubtful accounts.
Understanding U.S. GAAPUnderstanding U.S. GAAP
Key DifferencesKey Differences
Accounting for Receivables

48. Slide
8-48
Like the IASB, the FASB has worked to implement fair value
measurement for all financial instruments, but both Boards
have faced bitter opposition from various factions. As a
consequence, the Boards have adopted a piecemeal
approach; the first step is disclosure of fair value
information in the notes. The second step is the fair value
option, which permits, but does not require, companies to
record some types of financial instruments at fair value in
the financial statements. Both Boards have indicated that
they believe all financial instruments should be recorded
and reported at fair value.
Understanding U.S. GAAPUnderstanding U.S. GAAP
Key DifferencesKey Differences
Accounting for Receivables

49. Slide
8-49
IFRS and GAAP differ in the criteria used to derecognize
(generally through a sale or factoring) a receivable. IFRS is a
combination of an approach focused on risks and rewards
and loss of control. GAAP uses loss of control as the
primary criterion. In addition, IFRS permits partial
derecognition; GAAP does not.
IFRS specifies a two-step process for determining the
impairment of receivables for a period. This process starts
by identifying individual impairments of specific receivables
and then estimating impairments of groups of receivables.
GAAP does not specify a similar approach.
Understanding U.S. GAAPUnderstanding U.S. GAAP
Key DifferencesKey Differences
Accounting for Receivables

50. Slide
8-50
Looking to the FutureLooking to the Future
Understanding U.S. GAAPUnderstanding U.S. GAAP
Both the IASB and the FASB have indicated that they believe that
financial statements would be more transparent and
understandable if companies recorded and reported all financial
instruments at fair value. The fair value option for recording
financial instruments, such as receivables, is an important step in
moving closer to fair value recording. However, we hope that this
is only an intermediate step and that the Boards continue to work
toward the adoption of comprehensive fair value accounting for
financial instruments. In their current deliberations regarding
accounting for financial instruments, it appears that IASB wants
amortized costs for receivables, but GAAP is tending toward fair
value.
Accounting for
Receivables

51. Slide
8-51
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