Question

Valuation of Account Receivables Allowance Methods Direct Write-Off Method Basis Estimated Loss No estimate of potential loss Year-End Adjustment No year-end adjustment Write-Off % of Receivables Recovery GAAP? Not GAAP; when material GAAP: requires when material Inventory Cost Flow Perpetual System Periodic System Continuously tracks changes in the Determines the quantity of inventory on Inventory account hand only periodically Method Purchases Freight-in Purchase R&A/ Purchase Disc Sales Entry 1: Entry 1: Entry 2: For Each Sales To detect misstatement; Record the necessary write-down No write-down After taking a physical inventory Ending Inventory COGS Benefit Better control Simpler accounting process

Answer 1

0 Answar! Valuation of Account Recenable. Wabuelier of Accoum Re Direct write-off Method Allowances Method No estimate of Potential loss 1 % of Rocivable Basis Estimated - Loss Year end Adjustment No year end Adjustment Adjustment entry for transfer -ring to Allowances account write-off Direct write of thought debit of Po Lale No impact on Pol at the time of write off. Recovery firstly Reverse the write-off entry & then Recognize the Cash Recetred. In these too we will credit I the allowances al & debit the BIR al & then cop Recog- -nise the cash. Coris • Matching Priciple play Not be satisfying 1. maccurate. Amount of • Exta work out to estimate the Art of bad debt • Maintaing extra ledger Profit • overstates Accounts Receivable. GAAP Not GAAP. when Material GAAP Requires when Material

Inventory Cost flow in Perfectial System Periodic System Basis Method Continuously tracks changes in the inventory account Determines the quantity of Immatory on hand only Periode Purchase Adjusted through two Accounts loe. Imentory and cows alc. ne are directly debited to asshosgate Purchase alco freight-In Cest is directly added to the Inventory Credited Directly tored to Inchtong ak. temporary holding Account freight in is created Purchas RDA/ Purch. disc. teporary al for Purchas Return or Purch.dis. is Maintioned Sales & ABC at Dr xx To sales xx | 1. ABC al To sales dr. alo xx . XX un cous on Dr. xx To tinatory xx After taking To detect Mistatement! es Physical Invent: Record the Necessary write-down No write down Ending Inventory depends on physical count dop keeps continus track of Inventory throughout the Year Continus to update aftes each Sales COGS Calculated by adding Purcha to op. Inventory & Substracting closing Inertory Benifits Better Control Simple accounting Process