Receivables & Bank Reconciliation

Introductory Financial Accounting
Lecture Week 5
Receivables
Summer Semester 2014
Greg Cusack

www.fbe.unimelb.edu.au

Learning Objectives

At the end of the lecture, students should
 Be able to apply the revenue recognition principle to determine the accepted time to record sales revenue for typical retailers, wholesalers, manufacturers and service companies.
 To understand the recording and management implications of credit sales, including the offering of sales discounts and the estimation of doubtful debts
 To estimate, report and evaluate the effects of uncollectable accounts receivable (bad debts) on the financial statements.
 To record Doubtful Debts applying the Percentage of Sales and Aged
Methods.
 To understand the nature, purpose and process of bank reconciliations.
 To complete bank reconciliations over consecutive months.
2

1

Cash & Receivables

For many organizations, cash and receivables are a significant assets. Given their significance, it is crucial that cash and receivables are managed and recorded appropriately.
By comparing Cash and Cash Equivalents and Trade
Receivables to Total Current Assets, one has an appreciation of the degree of significance that these two assets have on the financial stability and liquidity of the organization.

3

Cash & Receivables

The examination of Fairfax Ltd (Media) and Wesfarmers (Retail) in terms of the impact of cash and receivable to total current assets 4

2

Brainstorm Cash & Receivables

What conclusions can be drawn from the diagnosis of the current asset extract of both Fairfax Ltd and Wesfarmers for the financial years 2012 and 2011?
What strategies are available to organizations to manage cash and receivables?
What role does the selection of an accounting policy have on the bottom line figure in relation to financial stability and liquidity? 5

Cash & Receivables

Accounting Policy
Revenue Recognition
Uncollectable Revenue