Question

1. Please describe the difference between an accounts receivable and a notes receivable.

2. There are times when businesses cannot collect the money that is owed to them by their customers. When this happens, businesses incur an expense. There are two methods for recording uncollectible receivables. They are the allowance method and the direct write off method. Please explain the difference between these two methods.

*****Please post your answer as a typing or text, not as a photo!!!

Answer 1

ANSWER :

1.The difference between an accounts receivable and a notes receivable :-

Notes Receivable :-

Notes receivable does as well, however this class just incorporates obligations that have a promissory note appended.Obligations entered as notes receivable are normally paid back over a more extended period.Notes receivable and debt claims both appear on your accounting report as resources

• The off chance that your clients owe obligations that have promissory notes appended, you record the obligations under notes receivable.
• This goes on the monetary record independently from records receivable, however despite everything it considers an advantage.
• Assume your client is two months late paying a $2,100 greenback. You offer three months additional opportunity to pay, as an end-result of a promissory note, and the client concurs.
• You subtract the $2,100 from records receivable and enter it into notes receivable.
• Account receivable goes on the books as a present resource.
• You do likewise for the part of notes receivable you expect will be settled in the following year. The cash you'll get over a year out goes on the books as a non-current resource.

Account Receivable :

Account receivable tracks cash you're owed yet haven't gotten yet.

• Assume your firm conveys $3,000 of metal rollers to a client. On the off chance that they're not paying in advance, you present them with a receipt, at that point enter the $3,000 owed in your business records.
• Except if you're maintaining your business carefully on a money premise, you consider the $3,000 salary once you convey the metal rollers.
• When you update your asset report, you take the aggregate sum your clients owe you and record it as account receivable.
• Similarly as the $3,000 considered pay, on the monetary record you treat it as a benefit.

2).ANS :-

• Under the direct write off methodology, a corporation doesn't anticipate debt expense.
• Rather, it waits till associate degree account is truly written off as invalid before recording debt expense.
• This suggests its assets are going to be reported on the record at their full amounts—implying that every one of the assets are going to be turning to money.
• If there's some doubt regarding the collectibility of a number of the assets, the assets area unit doubtless immoderate and also the company's profit is doubtless overstated.
• Since there's sometimes a big quantity of your time between a credit sale and also the write off of a foul account, the debt expense can occur in a very a lot of later amount than the revenue from the sale.
• This is often a issue under the matching principle.

• The accounting profession prefers the allowance methodology over the direct write off methodology as a result of the assets are going to be given on the record with a discount known as the allowance for uncertain accounts.
• This suggests internet quantity of the assets are going to be lower and nearer to the quantity that may truly be collected.
• Debt expense is reported at the time that the allowance for uncertain accounts is made and adjusted.
• Hence, the debt expense is reported nearer to the time of the credit sale.
• It ought to be noted that the inner Revenue Service needs the direct write off methodology.
• They like to ascertain the write-off for debt expense only associate degree account due is truly written off as against allowing a deduction for associate degree anticipated potential loss.