• The net method supposes all the cash discounts can be taken. 净价法假设所有的现金折扣都可以被享受。 • But if cash discount is not taken, then put the discount amount into “interest revenue”.
Net method 净价法 • How to use net method:
① At first, use the net price to record accounts receivable. ② If the cash discount is not realized (beyond discount period), then record the discount amount as “interest revenue”.
Net price=full price – trade discount
Trade Discounts
• Exp. A company sells a machine at a price of $2,500, but sells it to a customer at list less a 10% discount. (credit sale) • Net price=full price-trade discount=$2,500$2500×10%=$2,250 • Dr. Accounts Receivable 2,250 • Cr. Sales Revenue 2,250
Cash Discounts • Cash Discounts: often called sales discounts, represent reductions not in the selling price of a good or service but in the amount to be paid by a credit customer if paid within a specified period of time. (reduction in payment) • 现金折扣：又称为销售折扣，它并不是对商品或劳务 销售价格的减少，而是对赊购客户在特定的期间内付 款而给予应付款金额的减少。(应付款的减少) • It is a discount intended to provide incentive for quick payment. (encourage customers to pay the cash as soon as possible)
Part B
Current Receivables 短期应收款ng to learn:
The classification of “Receivables”
Accounts receivable
Notes receivable
Receivables • Receivables are a company’s claims to the future collection of cash, other assets or services. 应收款是企业在未来要求收取现金、其他 资产或者服务的权利。
Exp. Interest Receivable
Accounts Receivable • Accounts receivable are coming from credit sale (赊销). • Accounts receivable are supported by the customer’s credit and an invoice.
Chapter 2 Cash and Receivables
第二章 现金及应收款
Part A
Cash and Cash Equivalents
• In this part, we are going to learn:
Cash
Cash equivalents
Cash • Cash includes currency and coins, balances in checking accounts, and items acceptable for deposit in these accounts. • 现金包括纸币、硬币、银行支票存款账户的余额以及 可以存入这些账户的款项。 • Simply, “cash”=money hold in hand + money in the bank
Gross Method V.S. Net Method • In America, most companies use the gross method because it’s easier than the net method. • But in China, only the gross method is allowed to use.
Cash Discounts • Exp. Our company offered cash discount: 2/10, n/30.
2/10, meaning a 2% discount if paid within 10 days. (10 days---discount period) n/30, meaning no discount if paid within 30 days.
Example of net method • Our company’s credit terms are stated as 2/10, n/30. On Oct. 5, 2011, we sold merchandise at a price of $20,000. The customer paid 70% of its total price on Oct. 14 and the remaining balance of $6,000 on Nov. 4.
Comparing trade discounts & cash discounts • Trade discounts are often offered to those customers who purchase goods/services in large quantity. • Cash discounts are offered to those customers who pay the cash within the discount period. • The purpose of trade discounts is to encourage large purchase. • The purpose of cash discounts is to encourage quick payment.
Gross Method V.S. Net Method
• The gross method supposes all the cash discounts can not be taken. 总价法假设所有的现金折扣都不能被 享受。 • But if cash discount is taken, then put the discount amount into “sales discounts”.
• Trade discounts only has one way to record: use the net price to record the accounts receivable and the revenue. • Cash discounts has two ways to record: gross method & net method.
Cash Equivalents
• Cash Equivalents include money market funds, treasury bills, and commercial paper. • 现金等价物包括货币市场基金、国库券和商业票据等。 • The maturity date (到期日) for cash equivalents should be no longer than three months from the date of purchase.
Comparing trade discounts & cash discounts • Trade discounts are expressed as percentage reduction from price. (exp. 20% of trade discount) • Cash discounts are expressed as terms of 2/10, n/30.
• Two ways to record cash discounts:
Gross method Net method
Gross method 总价法 • How to use gross method:
① At first, use the full price to record accounts receivable. ② If the cash discount is realized (within discount period), then put the discount amount into “sales discount”.
Trade receivables 商业应收款: resulting from the sale of goods or services. Receivables Exp. Accounts Receivable Nontrade receivables 非商业应收款: not resulting from the sale of goods or services.
Initial Valuation of Accounts Receivable 应收账款的初始计量