Week 1, DQ 1:
How would you describe the entries to record the disposition of accounts receivables? What is their function?
Since the majority of US thrive on the use of credit cards, the accounts receivables for a company may no longer be on a cash-to-cash basis. A company may need to sell these accounts to other companies who specialize in handling accounts receivables if they need cash more quickly or if it would be too costly to perform the necessary billing to collect on the account. The entries used to record the disposition when the receivables are sold to a factor often detail the cash received plus the service charge. The company can then balance their receivables account. When a credit card company records a credit card transaction they detail the cash plus the service charge as well, then they can balance their sales account.
Wal-Mart is a company that I am highly interested in studying due to the fact that people either love them or hate them, or love to hate them. Wal-Mart’s net receivables for their fiscal year (ending in January 2011) were $5089.00 which was significantly more than the previous 5 years. I don't know a lot about Wal-Mart or their business practices as of yet, but I did read up on their credit card practices. Customers can apply for a Wal-Mart Chase credit card in store and if they are approved they get to start using it immediately. It doesn't seem that their receivables are too terribly high, so they must sell the receivables to Chase in exchange for more liquid assets. Week 1, DQ 2:
How are bad debts accounted for under the direct write-off method? What are the disadvantages of this method? Under the direct write-off method, bad debts are accounted as a debit to bad debts expense and a credit to accounts receivable. At my current employer we see several write-offs each and every month the process has some similarities from the reading. For example after 90 days of account inactivity at my place of employment the account is...
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