Unit 7 Assets-Current Assets III.ReceivablesII.PrepaymentIII.Inventory
Unit 7 Assets—Current Assets Ⅱ Ⅰ.Receivables Ⅱ.Prepayment Ⅲ. Inventory
Current assets areassets thatareexpected tobeconverted to cash, sold or consumed within 12months or within the business's normal operatingcycle if longer than a year.22025/12/3
2 2025/12/3 ⚫ Current assets are assets that are expected to be converted to cash, sold or consumed within 12 months or within the business’s normal operating cycle if longer than a year
I.ReceivablesThe money owing from sales on credit or other individualsarereceivables,whichreferto themonetary claims againstbusinesses,individuals and other debtorsAccountsReceivableReceivablesNotesReceivableOtherReceivables32025/12/3
3 2025/12/3 Ⅰ.Receivables ⚫ Accounts Receivable ⚫ Notes Receivable ⚫ Other Receivables Receivables The money owing from sales on credit or other individuals are receivables, which refer to the monetary claims against businesses, individuals and other debtors
1.Accounts ReceivableAccounts receivable are the receivablescollected by a business in sellingproducts,goods or services2025/12/3
4 2025/12/3 1.Accounts Receivable ⚫ Accounts receivable are the receivables collected by a business in selling products, goods or services
(1)AccountingofAccountsReceivableWhenabusiness makes its sales on accountDr.AccountsReceivableCr.Sales RevenueWhenthe amount onaccount is collectedDr.CashCr.Accounts Receivable52025/12/3
5 2025/12/3 (1)Accounting of Accounts Receivable ⚫ Dr. Accounts Receivable Cr. Sales Revenue When a business makes its sales on account ⚫ Dr. Cash Cr. Accounts Receivable When the amount on account is collected
DiscountDiscountCashDiscountCommercialDiscountAdeductionfromtheCertain sum ofgross invoice value thatmoney that is allowedcanbetaken onlyif thetobe deducted frominvoiceispaidwithinacommodity pricesspecified periodof time toencourageearlypayment62025/12/3
6 2025/12/3 Commercial Discount Discount ⚫ Certain sum of money that is allowed to be deducted from commodity prices. Discount Cash Discount ⚫ A deduction from the gross invoice value that can be taken only if the invoice is paid within a specified period of time to encourage early payment
CommercialDiscount It is usually expressed as a percentage, such as5%,10%,etcIt does not affect the entry value of accountsreceivable but isonly consideredtheadjustmentof prices.2025/12/3
7 2025/12/3 Commercial Discount ⚫ It is usually expressed as a percentage, such as 5%,10%,etc. ⚫ It does not affect the entry value of accounts receivable but is only considered the adjustment of prices
CashDiscountItnormallyappearsas"2/10,1/20,n/30"ontheinvoice2/10 means a discount of 2%of thegross invoicepriceisdeductible forpaymentswithin10days;1/20means1%deductibleforpaymentswithin20days;n/30meansthatnodiscount if thepaymentisafter30daysfollowingtheinvoicing date.82025/12/3
8 2025/12/3 Cash Discount It normally appears as “2/10,1/20,n/30” on the invoice. ⚫ 2/10 means a discount of 2% of the gross invoice price is deductible for payments within 10 days; ⚫ 1/20 means 1% deductible for payments within 20 days; ⚫ n/30 means that no discount if the payment is after 30 days following the invoicing date
CashDiscountWhentransactionoccurredDr.AccountsReceivableCr.Sales RevenueWhenthepaymentisreceived andthecashdiscountisrealizedDr.CashSales DiscountCr.AccountsReceivable92025/12/3
9 2025/12/3 Cash Discount ⚫ Dr. Accounts Receivable Cr. Sales Revenue When transaction occurred ⚫ Dr. Cash Sales Discount Cr. Accounts Receivable When the payment is received and the cash discount is realized
Example---- Cash DiscountOnJune1,K15soldmerchandiseof$50.000toSpeed5oncredit.Thecredittermwas2/10.1/20.n/30.andSpeed5paidthemoneyonJune18 June 150,000Dr.AccountsReceivable-Speed550,000Cr.SalesRevenue June 18Dr.Cash49,500500SalesDiscount50,000Cr.Accounts.Receivable-Speed5102025/12/3
10 2025/12/3 Example - Cash Discount ⚫ On June 1, K15 sold merchandise of $50,000 to Speed 5 on credit. The credit term was 2/10,1/20,n/30, and Speed 5 paid the money on June 18. ⚫ June 1 Dr. Accounts Receivable-Speed 5 50,000 Cr. Sales Revenue 50,000 ⚫ June 18 Dr. Cash 49,500 Sales Discount 500 Cr. Accounts Receivable-Speed 5 50,000