Internal Control Procedures for Accounts Receivable

Internal controls for accounts receivable are used to reduce the risk of fraud and error in the accounts receivable process. The purpose of the accounts receivable internal control checklist is to ensure that valid sales invoices are properly recorded and that customers pay promptly.

Internal Control Procedures for Accounts Receivable January 20th, 2017Team
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Accounts Receivable Control Account

The accounts receivable control account is an account in the general ledger which maintains summary postings relating to accounts receivables. The account, which is sometimes referred to as the sales ledger control account, is used to allow the detail of customer transactions to be kept in a separate subsidiary personal account ledger which is not part of the system.

Accounts Receivable Control Account December 7th, 2016Team
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Contra Entry Journal

A business has a balance due from a customer on its accounts receivable ledger, but also owes the customers business an amount on its accounts payable ledger for goods supplied. A contra entry is used to offset the two amounts, leaving a net amount outstanding to the customer.

Contra Entry Journal November 6th, 2016Team
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Chain Discount Calculator

The chain discount calculator works out a products net price after applying multiple trade discounts to its list price. This free Excel calculator also provides a summary showing the original price, total discount, and net price, together with a calculation of the single equivalent rate (SED).

Chain Discount Calculator November 6th, 2016Team
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Chain Discounts in Accounting

Chain discounts are sometimes called multiple discounts, and refer to a of discounts which are applied to an original selling price (list price) to arrive at a net sales price. The discounts are applied in sequence and are calculated using the series discount formula.

Chain Discounts in Accounting November 6th, 2016Team
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Allowance Method for Uncollectible Accounts

The allowance for uncollectible accounts method is used to estimate the bad debt expense required to reflect uncollectible accounts receivable at the end of an accounting period. The method complies with the matching principle and for this reason is preferred over the direct write off method.

Allowance Method for Uncollectible Accounts September 19th, 2017Team
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Direct Write-off Method

The direct write-off method of accounting for uncollectible accounts is used to remove specific uncollectible amounts from the accounts receivable balance when they are identified. This debt write off method does not comply with the matching principle and can only be used for immaterial amounts.

Direct Write-off Method November 6th, 2016Team
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Cost of Trade Credit Calculator

This free Excel cost of trade credit calculator can be used to calculate the annualized cost of offering early payment discounts to customers or alternatively of not taking early payment discounts from suppliers.

Cost of Trade Credit Calculator November 6th, 2016Team
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Trade Discount

As a trade discount is deducted before any exchange takes place with the customer, it does not form part of the accounting transaction, and is not entered into the accounting records of the business.

Trade Discount November 6th, 2016Team
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Bad Debt Recovery – Allowance Method

A business had previously written off a bad debt of 2,000 using the allowance method for bad debts, but has now managed to make a bad debt recovery and has received 900 in part payment of the account.

Bad Debt Recovery – Allowance Method November 6th, 2016Team
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Allowance Method For Bad Debt

A business uses the allowance method when accounting for bad debt, and has decided that a debt from a customer of 2,000 is not recoverable and needs to be recorded as a bad debt.

Allowance Method For Bad Debt November 6th, 2016Team
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Allowance for Doubtful Accounts

A customer has been invoiced a total of 5,000 for goods and the business has decided that there is doubt as to whether the customer can pay in full. They have decided to adjust the allowance for doubtful accounts provision by 500 in respect of the accounts receivable balance of 5,000.

Allowance for Doubtful Accounts November 6th, 2016Team
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