7-1

PREVIEW OF CHAPTER 7

Intermediate Accounting
IFRS 2nd Edition
Kieso, Weygandt, and Warfield
7-2
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE

Receivables - Claims held against customers and

others for money, goods, or services.

Oral promises of the Written promises to pay a

purchaser to pay for goods certain sum of money on a
and services sold. specified future date.

Accounts
Accounts Notes
Notes
Receivable
Receivable Receivable
Receivable

7-3 LO 3
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE

Non-Trade Receivables
1. Advances to officers and employees.

2. Advances to subsidiaries.

3. Deposits paid to cover potential damages or losses.

4. Deposits paid as a guarantee of performance or payment.

5. Dividends and interest receivable.

6. Claims against: Insurance companies for casualties sustained;

defendants under suit; governmental bodies for tax refunds;
common carriers for damaged or lost goods; creditors for returned,
damaged, or lost goods; customers for returnable items (crates,
containers, etc.).
7-4 LO 3
 Non-Trade
Non-Trade Receivables
Receivables
ILLUSTRATION 7-4
Receivables Statement
of Financial Position
Sheet Presentations

7-5 LO 3
 7 Cash and Receivables

LEARNING
LEARNING OBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:

1. Identify items considered cash. 6. Explain accounting issues related to

2. Indicate how to report cash and related items. recognition of notes receivable.

3. Define receivables and identify the different 7. Explain accounting issues related to valuation
types of receivables. of notes receivable.
8. Understand special topics related to
4. Explain accounting issues related to
receivables.
recognition of accounts receivable.
9. Describe how to report and analyze
5. Explain accounting issues related to valuation receivables.
of accounts receivable.

7-6
 Recognition
Recognition of
of Accounts
Accounts Receivable
Receivable

Trade Discounts
Use to:
 Avoid frequent changes in 10 %
catalogs. Discount for
new Retail
 Alter prices for different
Store
quantities purchased.
Customers
 Hide the true invoice price
from competitors.

7-7 LO 4
 Recognition
Recognition of
of Accounts
Accounts Receivable
Receivable

Cash Discounts (Sales Discounts)

 Offered to induce prompt
payment.
 Terms such as 2/10, n/30,
2/10, E.O.M., or net 30,
Payment
E.O.M. terms are
 Gross Method vs. Net 2/10, n/30
Method.

7-8 LO 4
 Cash
Cash Discounts
Discounts (Sales
(Sales Discounts)
Discounts) ILLUSTRATION 7-5
Entries under Gross
and Net Methods

7-9 LO 4
  Melakukan penj
Piutang
penjualan
Menerima pembayaran dlm jgk wktu diskon
Kas
Pot.penj
piutang
Menerima kas di luar jgka wktu diskon
Kas
piutang usaha

7-10
 Recognition
Recognition of
of Accounts
Accounts Receivable
Receivable
Illustration: On June 3, Bolton Company sold to Arquette Company
merchandise having a sale price of £2,000 with terms of 2/10, n/60. On
June 12, the company received a check for the balance due from Arquette
Company. Prepare the journal entries on Bolton Company books to
record the sale assuming Bolton records sales using the gross method.

June 3 Accounts Receivable 2,000

Sales Revenue

June 12 Cash2,000
(£2,000 x 98%) 1,960
Sales Discounts (2% x 2000) 40
Accounts Receivable 2,000

7-11 LO 4
 Recognition
Recognition of
of Accounts
Accounts Receivable
Receivable
Illustration: On June 3, Bolton Company sold to Arquette Company
merchandise having a sale price of £2,000 with terms of 2/10, n/60. On
June 12, the company received a check for the balance due from Arquette
Company. Prepare the journal entries on Bolton Company books to
record the sale assuming Bolton records sales using the net method.

June 3 Accounts Receivable 1,960

Sales Revenue

1,960
Cash2000-(2%
(£2,000 x 2000)
98%) 1,960
June 12
Accounts Receivable 1,960

7-12 LO 4
 Recognition
Recognition of
of Accounts
Accounts Receivable
Receivable
Illustration: On June 3, Bolton Company sold to Arquette Company
merchandise having a sale price of £2,000 with terms of 2/10, n/60, f.o.b.
shipping point. Prepare the journal entries on Bolton Company books to
record the sale assuming Bolton records sales using the net method, and
Arquette did not remit payment until July 29.

June 3 Accounts Receivable 1,960

Sales Revenue

June 12 Cash1,960 2,000

Accounts Receivable 1,960
Sales Discounts Forfeited 40

7-13 LO 4
 Recognition
Recognition of
of Accounts
Accounts Receivable
Receivable

Non-Recognition of Interest Element

A company should measure receivables in terms of their
present value.

In practice, companies ignore

interest revenue related to accounts
receivable because, for current
assets, the amount of the discount is
not usually material in relation to the
net income for the period.

7-14 LO 4
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE
How are these accounts presented on the Statement of
Financial Position?

Allowance for
Accounts Receivable Doubtful Accounts
Beg. 500 25 Beg.

End. 500 25 End.

7-15 LO 4
 ACCOUNTS RECEIVABLE

ABC Corporation
Statement of Financial Position (partial)
Current Assets:
Inventory $ 812
Prepaid expense 40
Accounts receivable 500
Less: Allowance for doubtful accounts (25) 475
Cash 330
Total current assets 1,657

7-16 LO 4
 ACCOUNTS RECEIVABLE

ABC Corporation
Statement of Financial Position (partial)
Current Assets:
Inventory $ 812
Prepaid expense 40
Accounts receivable, net of $25 allowance 475
Cash 330
Total current assets 1,657

7-17 LO 4
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE
Journal entry for credit sale of $100?
Accounts Receivable 100
Sales Revenue 100

Allowance for
Accounts Receivable Doubtful Accounts
Beg. 500 25 Beg.

End. 500 25 End.

7-18 LO 4
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE
Journal entry for credit sale of $100?
Accounts Receivable 100
Sales Revenue 100

Allowance for
Accounts Receivable Doubtful Accounts
Beg. 500 25 Beg.
Sale 100

End. 600 25 End.

7-19 LO 4
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE
Collected $333 on account?
Cash 333
Accounts Receivable 333

Allowance for
Accounts Receivable Doubtful Accounts
Beg. 500 25 Beg.
Sale 100

End. 600 25 End.

7-20 LO 4
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE
Collected $333 on account?
Cash 333
Accounts Receivable 333

Allowance for
Accounts Receivable Doubtful Accounts
Beg. 500 25 Beg.
Sale 100 333 Coll.

End. 267 25 End.

7-21 LO 4
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE
Adjustment of $15 for estimated bad debts?
Bad Debt Expense 15
Allowance for Doubtful Accounts 15

Allowance for
Accounts Receivable Doubtful Accounts
Beg. 500 25 Beg.
Sale 100 333 Coll.

End. 267 25 End.

7-22 LO 4
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE
Adjustment of $15 for estimated bad debts?
Bad Debt Expense 15
Allowance for Doubtful Accounts 15

Allowance for
Accounts Receivable Doubtful Accounts
Beg. 500 25 Beg.
Sale 100 333 Coll. 15 Est.

End. 267 40 End.

7-23 LO 4
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE
Write-off of uncollectible accounts for $10?
Allowance for Doubtful accounts 10
Accounts Receivable 10

Allowance for
Accounts Receivable Doubtful Accounts
Beg. 500 25 Beg.
Sale 100 333 Coll. 15 Est.

End. 267 40 End.

7-24 LO 4
 ACCOUNTS
ACCOUNTS RECEIVABLE
RECEIVABLE
Write-off of uncollectible accounts for $10?
Allowance for Doubtful accounts 10
Accounts Receivable 10

Allowance for
Accounts Receivable Doubtful Accounts
Beg. 500 25 Beg.
Sale 100 333 Coll. 15 Est.
10 W/O W/O 10

End. 257 30 End.

7-25 LO 4
 ACCOUNTS RECEIVABLE

ABC Corporation
Statement of Financial Position (partial)
Current Assets:
Inventory $ 812
Prepaid expense 40
Accounts receivable, net of $30 allowance 227
Cash 330
Total current assets 1,409

7-26 LO 4
 7 Cash and Receivables

LEARNING
LEARNING OBJECTIVES
OBJECTIVES
After studying this chapter, you should be able to:

1. Identify items considered cash. 6. Explain accounting issues related to

2. Indicate how to report cash and related items. recognition of notes receivable.

3. Define receivables and identify the different 7. Explain accounting issues related to valuation
types of receivables. of notes receivable.

4. Explain accounting issues related to 8. Understand special topics related to

recognition of accounts receivable. receivables.
9. Describe how to report and analyze
5. Explain accounting issues related to
receivables.
valuation of accounts receivable.

7-27
 Valuation of Accounts Receivable-Penilaian
Piutang Usaha
 Reporting of receivables involves

1) classification (klasifikasi)

2) valuation on the statement of financial position (penilaian berapa

yang akan disajikan dalam neraca)
 Classification involves determining the length of time each receivable
will be outstanding (lamanya waktu piutang tersebut beredar/belum
dibayar) ada kemungkinan lebih dari 1 tahun piutang jgka
Panjang non current asset
 Value and report short-term receivables at cash realizable value.
Piutang disajikan sebesar nilai kas yang dapat direalisasi
perkiraan kas yang akan diterima perusahaan dari piutang
tersebut, karena terdapat kemungkinan ada sebagian piutang yang
tidak tertagih piutang - CKP
7-28 LO 5
 Valuation
Valuation of
of Accounts
Accounts Receivable
Receivable
Uncollectible Accounts Receivable (Piutang Tidak
Tertagih)
 Record credit losses as debits to Bad Debt Expense (or Uncollectible Accounts
Expense) ketika terdapat estimasi piutang tidak tertagih, maka perusahaan
akan mencatatnya dengan mendebit “Beban piutang tak tertagih”atau “Beban
kerugian piutang”, Kredit:CKP (cadangan kerugian piutang)

 Normal and necessary risk of doing business on credit piutang tak tertagih
merupakan risiko bawaan ketika perusahaan menjual barang/jasanya secara
kredit

 Two methods to account for uncollectible accounts (2 metode untuk mencatat

beban kerugian piutang):
1) Direct write-off method  penghapusan langsung piutang tak tertagih
2) Allowance method membentuk “Cadangan Kerugian Piutang”

7-29
 Valuation
Valuation of
of Accounts
Accounts Receivable
Receivable

Methods of Accounting for Uncollectible Accounts

Direct Write-Off Allowance Method

Theoretically deficient: Losses are estimated:
 No matching.  Percentage-of-sales.
 Receivable not stated at  Percentage-of-receivables.
cash realizable value.  IFRS requires when bad
 Not appropriate when debts are material in
amount uncollectible is amount.
material.

7-30 LO 5
 Direct Write-Off/ Metode Penghapusan Langsung

 Tidak memenuhi matching principle/ cost principle yang meyakini

bahwa biaya/beban harus diakui bersamaan dengan pendapatan yang
dihasilkan dengan menggunakan biaya tersebut.
 Piutang tidak disajikan berdasarkan nilai realisasi kas (cash
realizable value) Ketika mencatat piutang dan penjualan,
perusahaan tidak membuat perkiraan berapa besarnya piutang
tak tertagih ( tidak membentuk cadangan kerugian piutang)
 Metode ini tidak disarankan ketika jumlah piutang tidak tertagih memiliki
jumlah yang material
 Ketika terdapat piutang tak tertagih, perusahaan langsung menghapus
piutang tersebut  Debit: Bad debt expense ; Kredit: Account
Receivable
7-31
 metode direct write off
 Pada tgl 1 feb. PT. ABC menjual brg secara
kredit sebesar Rp 10.000
Piutang usaha 10.000
penjualan 10.000
 Pada 28 feb piutang sebesar 1000 dinyatakan
tdk tertagih krn pelanggan tidak mampu
membyar
Bbn piutang tdk tertagih 1000
piutang usaha 1000

7-32
  Pada tgl 10 maret, pelanggan menyatakan
sanggup membayar piutang PT ABC sebesar
1000 yg td sdh dihapus & PT ABC menerima
pelunasan total sebesar Rp 10.000
Jurnal utk memunculkan kembali piutang yg td
sdh dhapus
Piutang usaha 1000
Bbn piutang tak tertagih 1000
Jurnal utk menerima pelunasan
Kas 10.000
piutang usaha 10.000

7-33
 Diasumsikan PT ABC menerima pelunasan
piutang yg tdk dihapus (piutang 1000 yg
dihapus td bnr2 tdk tertagih)
Kas 9000
piutang ush 9000

7-34
 Uncollectible Accounts Method (Metode Cadangan
Kerugian Piutang)

 Perusahaan membentuk Cadangan Kerugian Piutang (CKP)

/Allowance for Doubtfull Account dengan membuat jurnal:
Debit: Bad Debt Expense (bbn kerugian piutang/bbn piutang tak
tertagih), Kredit: Allowance for Doubtfull Account (CKP)
 Jumlah CKP tersebut bisa didasarkan:

a. Presentase dari penjualan

b. Presentase dari piutang yang beredar (berdasarkan umur piutang)
 Ketika jumlah piutang tak tertagih material, maka IFRS
mengharuskan perusahaan menggunakan metode ini
 Jurnal yang dibuat ketika ada piutang tak tertagih :

Debit: Allowance for Doubtfull Account (CKP), Kredit: Account

Receivable (piutang usaha/piutang dgg)
7-35
 Allowance
Allowance Method
Method ILLUSTRATION 7-7
Comparison of Bases for
Estimating Uncollectibles

The percentage-of-sales basis The percentage-of-receivables

results in a better matching of basis produces the better estimate of
expenses with revenues cash realizable value

7-36 LO 5
 Allowance
Allowance Method
Method

Percentage-of-Sales Approach -Metode

Presentase Penjualan
 Percentage based upon past experience and anticipate
credit policy besarnya presentase piutang tak tertagih
didasarkan dari pengalaman masa lalu
 Achieves better matching of cost and revenues
menekankan pada matching principle/ penandingan
biaya dan pendapatan (beban piutang tak tertagih kira-
kira berapa persen dari penjualan)
 Method frequently referred to as the income statement
approach dikenal juga sebagai pendekatan laba rugi
7-37 LO 5
 Percentage-of-Sales
Percentage-of-Sales Approach
Approach

Illustration: Gonzalez Company estimates that about 1% of net

credit sales will become uncollectible. If net credit sales are
R$800,000 for the year, it records bad debt expense as follows.
Membentuk CKP dilakukan ketika perush melakukan penj
Bad Debt Expense (1% x R$800,000) 8,000
Allowance for Doubtful Accounts 8,000
ILLUSTRATION 7-8

7-38 LO 5
 Allowance
Allowance Method
Method
Percentage-of-Receivables Approach / Metode
Presentase Piutang
 Not matching (tidak menekankan pada penandingan biaya dan
pendapatan, tetapi lebih menekankan pada nilai realisasi kas)
 Estimate of the receivables’ realizable value.
 Besarnya piutang tak tertagih diperkirakan berapa persen dari
piutang yang beredar

Companies may apply this method using

 one composite rate (satu tarif tunggal) or
 an aging schedule using different rates (tarif berbeda-beda
sesuai dengan umur piutang) semakin lama umur piutang
(piutang beredar), semakin tinggi kemungkinan piutang
7-39
 Percentage-of-Receivables
Percentage-of-Receivables Approach
Approach
ILLUSTRATION 7-9
Accounts Receivable
Aging Schedule

What entry
would Wilson
make assuming
that the
allowance
account had a
zero balance?

Bad Debt Expense 37,650

Allowance for Doubtful Accounts 37,650

7-40 LO 5
 Percentage-of-Receivables
Percentage-of-Receivables Approach
Approach
ILLUSTRATION 7-9
Accounts Receivable
Aging Schedule

What entry
would Wilson
make assuming
the allowance
account had a
credit balance
of €800 before
adjustment?
Saldo CKP =800 K, saldo akhir yang diinginkan= 37650 K
37650-800=36850 jumlah yg hrs disesuaikan (dibuat
jurnalny)
Bad Debt Expense (€37,650 – €800) 36,850
7-41 Allowance for Doubtful Accounts (CKP) 36,850 LO 5
  Saldo awal 800 (K), jurnal penyesuaian
36.850 (K)
 Saldo akhir CKP =37.650 (K) sejumlah ini
yg hrs dikurangkan dari Account Receivable
di neraca
 Diket piutang Rp 100.000, maka di neraca:

Piutang 100.000
CKP (37650)
Piutang bersih……

7-42
  Besaran CKP yang diinginkan Wilson Co.
pada akhir tahun 2020 sebesar 37.650
 Diketahui saldo awal CKP pada tahun 2020
sebesar 1000 di sebelah debet
 Jurnal utk mencatat (menyesuaikan CKP)
/mencatat bbn piutang tak tertagih
Jurnal
Bbn piutang tak tertagih 38.650
CKP 38.650
Saldo yg diinginkan 37650, saldo awal 1000
D) jurnal agar hsl akhirnya 37650 K
Yg hrs disesuaikan 37650+1000 = 38650

7-43
 Allowance Method

Illustration: Sandel Company reports the following financial

information before adjustments.

Instructions: Prepare the journal entry to record bad debt

expense assuming Sandel Company estimates bad debts
at (a) 1% of net sales and (b) 5% of accounts receivable.

7-44 LO 5
 Allowance Method

Illustration: Sandel Company reports the following financial

information before adjustments.

Instructions: Prepare the journal entry assuming Sandel

estimates bad debts at (b) 1% of net sales.

Bad Debt Expense 7,500

Allowance for Doubtful Accounts 7,500
(€800,000 – €50,000) x 1% = €7,500

7-45 LO 5
 Allowance Method

Illustration: Sandel Company reports the following financial

information before adjustments.

Instructions: Prepare the journal entry assuming Sandel

estimates bad debts at (b) 5% of accounts receivable. CKP=
5%x 160000=8000 (K) saldo CKP yang diinginkan
Bad Debt Expense 6,000
Allowance for Doubtful Accounts 6,000
(€160,000 x 5%) – €2,000) = €6,000

7-46 LO 5
 Write-Off
Write-Off of
of Uncollectible
UncollectibleAccounts
Accounts mencatat
mencatat
piutang
piutang yang
yang benar2
benar2 tidak
tidak tertagih
tertagih
Illustration: The financial vice president of Brown Furniture
authorizes a write-off of the £1,000 balance owed by Randall Co. on
March 1. The entry to record the write-off is:

Allowance for Doubtful Accounts 1,000

Accounts Receivable 1,000

Assume that on July 1, Randall Co. pays the £1,000 amount that
Brown had written off on March 1. These are the entries:
Accounts Receivable 1,000
Allowance for Doubtful Accounts 1,000
Cash 1,000
Accounts Receivable 1,000
7-47 LO 5
 Impairment Evaluation Process

Companies assess their receivables for impairment each reporting

period. Possible loss events are:

1. Significant financial problems of the customer.

2. Payment defaults.

3. Renegotiation of terms of the receivable due to financial difficulty of

the customer.

4. Decrease in estimated future cash flows from a group of

receivables since initial recognition, although the decrease cannot
yet be identified with individual assets in the group.

7-48 LO 5
 Impairment Evaluation Process

A receivable is considered impaired when a loss event indicates a

negative impact on the estimated future cash flows to be received
from the customer. The IASB requires that the impairment
assessment should be performed as follows.

1. Receivables that are individually significant should be considered

for impairment separately.

2. Any receivable individually assessed that is not considered

impaired should be included with a group of assets with similar
credit-risk characteristics and collectively assessed for impairment.

3. Any receivables not individually assessed should be collectively

assessed for impairment.

7-49 LO 5
 Impairment Evaluation Process

Illustration: Hector Company has the following receivables classified into

individually significant and all other receivables.

Hector determines that Yaan’s receivable is impaired by €15,000, and

Blanchard’s receivable is totally impaired. Both Randon’s and Fernando’s
receivables are not considered impaired. Hector also determines that a
composite rate of 2% is appropriate to measure impairment on all other
receivables.
7-50 LO 5
 Impairment Evaluation Process

The total impairment is computed as follows.

ILLUSTRATION 7-10

7-51 LO 5
 Presentation and Analysis
General rules in classifying receivables are:
1. Segregate and report carrying amounts of different categories of
receivables.
2. Indicate receivables classified as current and non-current in the
statement of financial position.
3. Appropriately offset the valuation accounts for receivables that are
impaired, including a discussion of individual and collectively
determined impairments.
4. Disclose the fair value of receivables in such a way that permits it to
be compared with its carrying amount.
5. Disclose information to assess the credit risk inherent in the
receivables.
6. Disclose any receivables pledged as collateral.
7. Disclose all significant concentrations of credit risk arising from
receivables.

7-52 LO 9
 Presentation and Analysis

Analysis of Receivables ILLUSTRATION 7-24

Computation of Accounts
Receivable Turnover

This Ratio used to:

 Assess the liquidity of the receivables.
 Measure the number of times, on average, a company
collects receivables during the period.

7-53 LO 9