Text 8 Accounts and Notes Receivables

　　Use the allowance method of accounting for uncollectibles. Credit sales create receivables. Accounts receivable are usually current assets， and notes receivable may be current or long-term. Uncollectible receivables are accounted for by the allowance method or the direct write-off method. The allowance method matches expenses to sales revenue and also results in a more realistic measure of net accounts receivable.

　　Estimate uncollectibles by the percentage of sales and the aging approaches. The percentage of sales method and the aging of accounts receivable method are the two main approaches to estimating bad debts under the allowance method.

　　Use the direct write-off method of accounting for uncollectibles. The direct write-off method is easy to apply， but it fails to match the uncollectible-account expense to the corresponding sales revenue. Also， Accounts receivable are reported at their full amount， which misleadingly suggests that the company expects to collect all its accounts receivable.

　　In credit-card sales， the seller receives cash from the credit-card company （American Express， for example）， which bills the customer. For the convenience of receiving cash immediately， the seller pays a fee that is a percentage of the sale.

　　Identify internal control weaknesses in accounts receivable. Companies that sell on credit receive most customer collections in the mail. Good internal control over mailed-in cash receipts means separating cash-handling duties from cash accounting duties.

　　Account for notes receivable. Notes receivable are formal credit agreements. Interest earned by the creditor is computed by multiplying the note's principal amount by the interest rate times the length of the interest period.

　　Because notes receivable are negotiable， they may be sold. Selling a note receivable——called discounting a note——creates a contingent（possible） liability for the note's payee.

　　Report receivable on the balance sheet. All accounts receivable， notes receivable， and allowance accounts appear in the balance sheet. However， companies use various formats and terms to report these assets.

　　Use the acid-test ratio and days' sales in receivables to evaluate a company's position. The acid-test ratio measures ability to pay current liabilities from the most liquid current assets. Days' sales in receivables indicates how long it takes to collect the average level of receivables.

　　New Words

　　allowance method 備抵法

　　uncollectibles n. 不能收回的款項；壞帳

　　receivables n.應收帳款

　　long-term n. 長期（一年以上）

　　account vt. 會計處理

　　write——off n. 銷記，劃銷，轉銷

　　revenue n. 收入，收益

　　accounts receivable n. 應收帳款

　　credit sales n.賒銷

　　notes receivable n. 應收票據

　　current asset n. 流動資產

　　net accounts receivable n. 應收帳款凈額

　　approach n. 方法

　　aging of accounts receivable 應收帳款帳齡分析

　　bad debts n. 呆帳，壞帳

　　corresponding adj. 相應的，對應的

　　American Express n. 美國運通卡

　　fee n. 費用

　　internal adj. 內部的，內在的

　　receipts n. （復數）收入

　　creditor n. 債主，債權人

　　compute vt. 計算

　　multiply vt. 乘

　　principal adj. 主要的；資本的；本金的

　　negotiable adj. 可轉讓的，可流通的

　　discount vt. 打折扣，貼現

　　contingent adj. 應急的，意外的

　　liability n. 負債

　　payee n. 收款人

　　balance sheet n. 資產負債表

　　format n. 形式

　　acid- test ratio 酸性實驗比率（以流動負債與流動資產作比較）

　　evaluate v. 估價，評價

　　current liabilities n. 流動負債，經常性貸款，短期貸款