Receivables & The Allowance vs The Direct Write Off Methods
What you'll learn
- Define accounts receivable and notes receivable, their nature as assets, and representing money owed for goods or services provided on credit.
- Explain accounts receivable cycle, including recording, monitoring, and collecting accounts receivable, and importance of subsidiary ledgers.
- Analyze valuation methods for accounts receivable: allowance method and direct write-off method, considering financial statements and matching principle.
- Apply allowance method to estimate bad debt expense based on historical data, industry norms, and economic conditions.
- Compare allowance method and direct write-off method, considering advantages, limitations, and financial reporting implications.
- Describe components of a note receivable and record related journal entries.
- Calculate simple interest on notes receivable using appropriate formulas.
- Interpret financial impact of accounts receivable and notes receivable on balance sheet and income statement.
- Analyze control measures for effective management of accounts receivable, including credit policies and collection strategies.
- Evaluate implications of accounts receivable and notes receivable on financial analysis and decision-making processes.
- Basic understanding of accounting principles and concepts: Students should have knowledge of fundamental accounting concepts such as debits and credits, the accounting equation, and the basic financial statements.
- Familiarity with financial statements and the accounting equation: Students should be able to analyze financial statements, understand their components (such as assets, liabilities, and equity), and grasp how transactions affect the accounting equation.
- Proficiency in mathematical calculations: Students should be comfortable performing mathematical calculations, including addition, subtraction, multiplication, and division. Basic knowledge of percentages and ratios is also beneficial.
- Knowledge of journal entries and posting: Students should understand the concept of journal entries and how to record them in the appropriate accounts. Knowledge of the chart of accounts and the posting process is essential.
Welcome to our comprehensive course on Accounts Receivable and Notes Receivable in accounting. In this course, we will explore the fundamental concepts and practical applications of managing receivables, including accounts receivable and notes receivable.
We will begin by examining the characteristics of accounts receivable and notes receivable, understanding their role in financial transactions. The accounts receivable cycle will be thoroughly covered, including the journal entries for recording accounts receivable and the use of subsidiary ledgers to track individual customer balances.
A major focus of the course will be on the valuation of accounts receivable. We will delve into two commonly used methods: the allowance method and the direct write-off method. You will gain a comprehensive understanding of these methods and learn how they impact financial statements. We will explore the estimation of bad debt expense under the allowance method, emphasizing the importance of accurate valuation.
In addition, we will discuss the significance of bank reconciliations and internal controls specific to cash, enhancing your knowledge of cash management. We will cover the setup and recording of a petty cash account, ensuring you have a solid grasp of this important aspect of cash control.
The course will also address notes receivable, including their components and the journal entries involved in recording and receiving payment on a note. You will learn how to calculate simple interest, a crucial skill in analyzing and managing note receivable transactions.
To facilitate your learning experience, this course offers a wide range of resources. You will have access to downloadable PDF files for offline reference, Excel practice files to reinforce your skills, multiple-choice and short calculation practice questions to assess your understanding, and engaging discussion questions to foster interactive learning with fellow students.
Rest assured that you will be learning from a highly qualified instructor with extensive experience in accounting and teaching. With certifications such as CPA and CGMA, as well as a Master of Science in Taxation, the instructor possesses the expertise and practical insights necessary to guide you through the complexities of accounts receivable and notes receivable.
Enroll now to gain a comprehensive understanding of receivables, develop valuable skills, and advance your career in accounting.
Who this course is for:
- Aspiring Accountants: Individuals who are pursuing a career in accounting or finance and want to develop a strong understanding of accounting concepts and techniques.
- Business Owners and Managers: Entrepreneurs, small business owners, and managers who want to enhance their financial literacy and gain insights into managing and interpreting financial information.
- Students and Professionals in Related Fields: Students studying business, finance, economics, or any other field that requires a basic understanding of accounting principles. Professionals in non-accounting roles who need to interact with financial statements and make informed decisions based on financial data.
- Bookkeepers and Accounting Assistants: Individuals currently working or aspiring to work in bookkeeping or accounting assistant roles, seeking to improve their knowledge and skills in recording and maintaining financial transactions.
- Anyone Interested in Accounting: Individuals with a general interest in accounting, personal finance, or understanding how businesses manage their finances. No prior accounting experience is required.
Through working with students from many different schools, Mr. Steele has learned best practices for helping people understand accounting fast. Learning new skills and finding the best way to share knowledge with people who can benefit from it is a passion of his.
Mr. Steele has experience working as a practicing Certified Public Accountant (CPA), an accounting and business instructor, and curriculum developer. He has enjoyed putting together quality tools to improve learning and has been teaching, making instructional resources, and building curriculum since 2009. He has been a practicing CPA since 2005. Mr. Steele is a practicing CPA, has a Certified Post-Secondary Instructor (CPI) credential, a Master of Science in taxation from Golden Gate University, a Bachelor’s Degree in Business Economics with an emphasis in accounting from The University of California Santa Barbara, and a Global Management Accounting Designation (CGMA) from The American Institute of CPA (AICPA).
Mr. Steele has also authored five books that can be found on Amazon or in audiobook format on Audible. He has developed bestselling courses in accounting topics including financial accounting and QuickBooks accounting software.
In addition to working as an accountant, teaching, and developing courses Mr. Steele has helped create an accounting website at accountinginstruction, a YouTube channel called Accounting Instruction, Help, and How Too, and has developed supplemental resources including a Facebook Page, Twitter Page, and Podcasts that can be found on I-tunes, Stitcher, or Soundcloud. Mr. Steele's teaching philosophy is to make content applicable, understandable, and accessible.
Adult learners are looking for application when they learn new skills. In other words, learners want to be able to apply skills in the real world to help their lives. Mr. Steele’s formal accounting education, practical work experience, and substantial teaching experience allow him to create a curriculum that combines traditional accounting education with practical knowledge and application. He accomplishes the goals of making accounting useful and applicable by combining theory with real-world software like Excel and QuickBooks.
Many courses teach QuickBooks data entry or Excel functions but are not providing the real value learners want. Real value is a result of learning technical skills like applications, in conjunction with specific goals, like accounting goals, including being able to interpret the performance of a business.
Mr. Steele makes knowledge understandable by breaking down complex concepts into smaller units with specific objectives and using step by step learning processes to understand each unit. Many accounting textbooks cram way too much information into a course, making it impossible to understand any unit fully. By breaking the content down into digestible chunks, we can move forward much faster.
Mr. Steele also makes use of color association in both presentations and Excel worksheets, a learning tool often overlooked in the accounting field, but one that can vastly improve the speed and comprehension of learning accounting concepts.
The material is also made understandable through the application of concepts learned. Courses will typically demonstrate the accounting concepts and then provide an Excel worksheet or practice problems to work through the concepts covered. The practice problems will be accompanied by an instructional video to work through the problem in step by step format. Excel worksheets will be preformatted, usually including an answer tab that shows the completed problem, and a practice tab where learners can complete the problem along with a step by step presentation video.
Mr. Steele makes learning accounting accessible by making use of technology and partnering with teaching platforms that have a vision of spreading knowledge like Udemy.