1. Arise from credit sales to customers. Often referred to as Trade Receivables. Other receivables include interest receivable, rent receivable, tax refund receivable. 1 © 2013 McGraw-Hill Ryerson Limited. Accounts Receivable LO 1

2. Companies selling on account need to: Maintain a separate account for each customer. Account for bad debts. 2 © 2013 McGraw-Hill Ryerson Limited. Accounts Receivable LO 1

3. Example: TechCom has the following Accounts Receivable balances at June 30: 3 © 2013 McGraw-Hill Ryerson Limited. General Ledger A/R Subledger Accounts Receivable RDA Electronics bal. 3,000bal. 1,000 CompStore bal. 2,000 Total 3,000 Control account balances with total of subledger balances. Accounts Receivable LO 1

4. General Ledger A/R Subledger Accounts Receivable RDA Electronics bal. 3,000bal. 1,000 950 bal. 3,950 CompStore bal. 2,000 950 bal. 2,950 Total 3,950 Control account balances with total of subledger balances. Example: Credit sale for $950. Accounts Receivable- CompStore 950 Sales 950 4 © 2013 McGraw-Hill Ryerson Limited. Accounts Receivable LO 1

5. General Ledger A/R Subledger Accounts Receivable RDA Electronics bal. 3,000bal. 1,000 720 950 720 bal. 280 bal. 3,230 CompStore bal. 2,000 950 bal. 2,950 Total 3,230 Control account balances with total of subledger balances. Example: Collection of account Cash 720 Accounts Receivable-RDA 720 5 © 2013 McGraw-Hill Ryerson Limited. Accounts Receivable LO 1

6. Some customers who are granted credit do not pay what they promised. The accounts of these customers are called uncollectible accounts or bad debts. 6 © 2013 McGraw-Hill Ryerson Limited. Valuing Accounts Receivable LO 1